Steel market in China remained depressed amidst gloomy prophesies as steel sector continued to suffer from oversupply which is likely to persist in Q1 2013 said Fitch Ratings agency.
Apart from the demand shrinkage, plus the dropping raw material prices like iron ore and billet, downbeat sentiment dominated the market. Besides credit remains tight at month end makes trading difficult towards month end.
China’s largest steelmaker Baoshan Iron & Steel expects steel prices to remain under pressure for the rest of this year as the industry shows no sign of curbing output and steps to stimulate the economy will take time to kick in. Clouded by 53-percent drop in first-half profit, the company said that it will be the most difficult 2013.
Even though slew of infrastructure projects were announced they are yet to pass the tender stage.
Persistently high steel production and rising inventories rules out revival in the short term. Key industry indicator PMI slumped below 50 according to official data but the HSBC Markit was even worse at 48 . Even though daily crude steel production has decline by 2% in 10-20th August to 1.93 million tonne per day from 1.97 million tonne in the first 10 days it is unlikely to have much impact with high inventory levels.
Recent overdrive by the Chinese commercial banks to penalize traders for bad debts created during recession and subsequent speculative use of funds in reality sector has dealt a body blow to the business confidence.
CLPPI - Chinese Long Product Price Index
CFPPI - Chinese Flat Product Price Index
CHISPI - Chinese Steel Price Index
Source - Strategic Research Institute