September 07, 2008

CISA sees high price in future steel market

According to a report issued by China Iron and Steel Association, though the global economy growth is slowing down, the steel market in the future will be still at high price, due to coming busy season of domestic steel consumption, low stock in European and American markets and in adequate supply. However, because the country enhances to eliminate obsolete capacity, the growth rate of steel production will be low.

According to the standards of 22 kinds of products with high energy consumption announced by National Development and Reform Commission, the country will eliminate 20% to 30% obsolete capacity in the sectors of steel, nonferrous metals and construction steel. Simultaneously, the price hike of raw materials and tight capital caused some medium and small enterprises to limit and halt production, which decreases the market supply of resources.

In the report, CISA said the reasons why domestic steel prices rise are stronger domestic demand, lower stock, lower level of steel production, and tight supply of resources. The steel export in March rose month-on-month, which eased the pressure for domestic market. Hike of raw material prices as well as large increase of international steel prices boosts the steel price increase.

Boosted by the tight resources and price hike of raw materials, international steel prices have been increasing. By the end of March, global composite steel index rose to 221.9 up by 10.5% or 21 points MoM and up by 38.1% YoY.

Due to the export decrease and price increase of raw materials, the steel prices in Asian market also soared up largely. By the end of March, the Asian composite index rose 11.1%, or 25.1 points among which the CIF price of section steel in Far East market rose 17.72%, and plate products rose by 11% to 15%.