How inflated raw materials governing the prices of Chinese Steel

For the second day in a row, Chinese steel prices have risen as China's main steel hub has loosened some limits on virus control measures. The determination of the Chinese government to enhance infrastructure spending in order to boost the economy, as well as the outlook for demand. The Chinese raw material Iron ore prices traded near USD 139/tonne in Singapore, recoup further losses after plummeting nearly 9% this week due to concerns about China's increasing Covid-19 outbreak. The demand outlook for Steel took a brighter turn after some areas in the Tangshan city lifted the lockdown and allowed a gradual reopening of firms in the city. The Chinese authorities also vowed to evoke infrastructure construction.

The sudden pandemic outburst in China has wreaked havoc on the buyers' spending and the supply chain. In the first quarter, the regions driving up nation's economy grew slower than the national growth rate. Additionally, in March, for Steel factories, buying costs for the raw materials, primarily iron ore, Steel scrap, and coal, have all fringed up. Steel's spot market sentiment has eventually improved, but the impact of COVID-19 on the downstream demand for Steel yet needs to be closely observed. Market players claim that the destocking of the iron ore inventories at major ports seems to be persisting.

Iron ore prices in Singapore rose by 0.5% to USD 139/Tonne, while the prices in Dalian closed by 2.0% higher. Also, with the rising prices of iron ore, market participants also observe a gain in Steel rebar prices and hot-rolled coil in Shanghai. However, the Chinese markets are still worried that Beijing, in particular, may be disclosed to more severe lockdowns, like what is happening in Shanghai.

As per ChemAnalyst, "The prices of Steel in China is anticipated to rise in the upcoming quarters, mainly backed by the surging raw material prices and the improving market sentiments for Steel. If the Chinese authorities can control the pandemic, there's a further chance of improving market dynamics. However, the soar in raw materials is expected due to the ongoing turmoil lading an impact. Thus, prices of Steel are expected to soar."