By the middle of March, China's composite steel price under Mysteel's assessment had climbed by Yuan 139.9/tonne ($20.4/t) from February 28 to reach a more than eight-month high of Yuan 4,605.4/t on March 14. During the second half of the month, however, prices weakened and on March 30 the composite price had settled at Yuan 4,492.3/t.

The collapse of several large-sized banks in the United States and Europe had triggered panic across global financial markets, and the intensifying concerns about fund liquidity among Chinese commodity market participants weakened domestic steel prices, according to Wang.

In the meantime, some economic data released by China's central government this month, such as newly-launched property projects and property sales nationwide, had fallen short of market expectations, which also dampened sentiment, he added.

Nonetheless, Wang believed that the recent slide in steel prices has "effectively released the pressure" on the domestic steel sector's fundamentals, considering that steel inventories are still drawing lower across the country. "As long as the market doesn't hear any more bearish news, steel prices should at least reverse the losses we have seen of late," he said.

As of March 30, total stocks of the five major carbon steel items held by 184 Chinese steel mills and trading warehouses in 35 cities nationwide under Mysteel's tracking stood at 20.7 million tonnes, lower by a large 2.5 million tonnes or 10.7% compared with the same period last year.

In terms of rebar and wire rods, whose prices mainly guide the country's steel prices, their inventories dropped more significantly by 14.7% and 11.3% respectively on year, the data showed.

"In the traditional season of high steel demand in spring, such low inventories indicate that the fundamentals are very healthy," Wang noted.

As for April, there is very limited scope for steel production to climb higher, while steel demand is likely to rise more vigorously in North and Northwest China, Wang predicted, which should lend support to steel prices, enabling them to recover further.

Meanwhile, Chinese steel mills are more confident about lifting their product prices next month, according to Wang, with most large-sized mills having raised their offering prices by Yuan 100-300/t for major steel products for delivery in April.

Since raw material prices are at high levels, it is reasonable for steelmakers to elevate their sales prices to make more profits as demand grows, he explained. "This will also strengthen the prices of all available steel products in the market," he added.

However, the domestic steel market still faces risks in April, as the steel output has risen to an alarmingly high level, Wang warned, adding that this may slow the reduction in steel inventories.

Over March 24-30, daily hot metal output among the 247 Chinese steel mills under Mysteel's survey had risen for 12 straight weeks to hit an average of 2.43 million tonnes/day, being 172,500 t/d or 7.6% higher compared with the same period last year. The average also marked a new high since June 2021.

"Steel prices in some regions of the country have already come under pressure from the high steel inventories held by local steelmakers, and such pressure could spread to surrounding regions at any time," he added. "This may even offset the upward momentum of steel prices that we usually witness in March and April, the peak consumption months," he noted.

Under such circumstances, steelmakers should rein in their production, otherwise the accumulation of steel inventories will hit market confidence and press down steel prices, Wang advised..



Article source：mysteel.net