China’s Steel Prices Have Fallen Due To Demand Concerns

- Jan 20, 2019 -

China's steel futures fell slightly on Tuesday as there are more signs that the world's second-largest economy will continue to cool, again worrying about weak demand prospects, while production remains high.

 

Yu Yong, chairman of the China Iron and Steel Association, said at an industry conference on Monday that the Chinese steel industry will shift its focus to optimizing production capacity, including products, locations and ownership, in 2019 to reduce overall capacity.

 

He acknowledged that the industry is still facing pressure from oversupply due to illegally increasing production capacity and new projects, as steel mills try to cash in at high profit margins.

As of 0224 GMT, the most active construction steel rebar contract on the Shanghai Futures Exchange fell 0.9% to 3,521 yuan ($521.98) per ton, after which the steel dealers' replenishment activity reached a two-month high on Monday. HRC fell 0.9% to $3,411.

 

Richard Lu, an analyst at Beijing CRU Consulting, said, “Prices are still mainly subject to range fluctuations and fluctuate within a small range.”

 

“Just look at the fundamentals of steel. Generally speaking, there is nothing big in the market. Demand is currently low, but steel production is still high.”

 

Data released on Monday showed that China’s exports unexpectedly fell the most in two years in December, while imports also shrank, indicating further economic weakness in 2019.

 

The iron ore price, which has the largest transaction volume on the Dalian Commodity Exchange, fell slightly by 0.3% to 507 yuan per ton. Rio Tinto announced that it had closed up on Monday after it announced that some of its cargoes had suffered force majeure after a fire at the Australian export terminal.

 

 “The market is still concerned about the potential damage of Cape Lambert (export terminal), which has been partially shut down by Rio Tinto after the fire,” ANZ Research said in a report. After the recent increase, coking coal prices fell 0.6% to 1,235.5 yuan. Coca-Cola rose 0.5% to 2,004.5 yuan. According to SteelHome Consulting, the spot supply of China's iron ore SH-CCN-IRNOR62 stabilized at $74.80 per tonne on Monday.


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