Steel market sentiments in China amid weak demand from downstream sector

In China, the Steel spot prices continued to decline since the previous week amidst bearish market sentiments. These downslope market dynamics are primarily backed by the COVID lockdown, driving export volumes to be expanded alongside a plunge in prices. The logistics issues and the shutdowns mainly impact the consumption of Steel from end-users. Steel's gradual declining demand outlook in the Chinese domestic market further compresses the producer's profit on the quotations, provoking a widened gap between the market players' expectations. Amidst that, the strict decarbonization policy of China to curb the emission of excess carbon is also affecting Chinese Steel production.

The COVID-19 outrage provoked the lockdown in Eastern Chinese cities. The sentiments are knocking on fears among the suppliers that strict COVID-19 measures will outspread to Beijing. The shutdown in production activities in Shanghai has heightened the worries over the broader disruption to economic activity among the domestic players and increased doubts about the Steel quotations. Since the COVID resurged in China, coal, iron ore, and coke prices plunged by more than 5%, 8%, and 6%, respectively.

This week, Tangshan's control has impacted the demand outlook for Steel in China. The production margin of several Chinese mills has dropped slightly. Additionally, the Chinese Steel manufacturers have raised their efforts to pile up their inventories. However, due to pre-holiday limited stock coupled with the decline in iron ore prices, steel producers opted for a wait-and-see approach.

As per ChemAnalyst, “The price of Steel is expected to decline in China during May primarily due to decreased demand amidst the unlocking of cities. According to market players, Chinese authorities are planning lift up the lockdown in Shanghai. Thus, a better supply chain for Steel export is expected. Also in June, the price of Steel is expected to rise owing to seasonal demand from the end-users and improved supply chain in China. “