China: Near-term outlook on steel products

• Low inventories offer support to construction steel prices
  
  
• Winter slowdown softens flat steel outlook
  
  

MySteel Global: The near-term outlook for five key steel products as shared by Mysteel on a weekly basis, drawing upon the results of related surveys and communication with Chinese market participants is outlined below.

Rebar & wire rod: Prices of the two major long steel items are forecasted to strengthen over December 29-31. With further declines in retail inventories, the fundamentals for the two construction steel products are expected to improve this week. On the supply side, as profits from long steel sales for most steel mills have been running near the breakeven point, some steelmakers plan to reduce operations at their steelmaking facilities. Moreover, demand for steel longs is projected to post a small rise this week amid warmer sentiment, which could also offer some support to prices.

Combined inventories of rebar and wire rod piled in commercial warehouses in the 35 Chinese cities under Mysteel's tracking nationwide thinned by a marked 6.2% or 222,300 tonnes on week to sit low at 3.38 million tonnes as of December 25.

Hot-rolled coil: HRC prices are expected to be rangebound during this week to December 31. Demand for this flat steel item is likely to remain weak amid the ongoing winter lull, and steel mills may continue to scale down their HRC output due to profit losses, reduced orders as well as mandated production curbs to combat air pollution in some northern cities.

Cold-rolled coil: CRC prices are projected to move sideways this week. Most traders still hold a cautious stance towards the near-term market due to downstream buyers' insufficient interest in replenishment during the winter off-season, and many traders are inclined to offer slight price concessions to close deals.

Medium plate: Prices of medium plates are likely to fluctuate within a narrow range through December 31. Most traders are cautious about the market in the short term as their inventories of medium plates have shown signs of accumulation amid weak seasonal demand, and some of them are offering discounts to liquidate their stocks.

Sections: Section prices are expected to post small declines over December 22-26. Re-rollers in Tangshan have resumed operations after the removal of mandated production restrictions, resulting in higher output of sections, which is expected to continue this week. But the overall market sentiment remains lukewarm despite rising rebar futures, indicating weakness in actual demand and putting downward pressure on section prices.

Note: This article has been written in accordance with a content exchange agreement between MySteel Global and BigMint.