Higher Prices
Expected to Deter New Orders, Mills See Improved Export Market
BEIJING
(August 15, 2017) – Chinese steel market sentiment remained robust at the beginning of August but the outlook for
steel orders was softer than the month before as mills and traders expected
some resistance to higher steel prices, according to the latest S&P Global
Platts China Steel Sentiment Index (CSSI), which showed a headline reading of
50.75 out of a possible 100 points.
The
August CSSI edged down by 4.56 points from 55.32 in July, but stayed above the
50 point threshold for the second consecutive month.
A
reading above 50 indicates expectations of an increase/expansion and a reading
below 50 indicates a decrease/contraction. The headline index has only breached
50 points twice in 2017.
The
outlook for domestic steel orders softened by 6.73 points from last month to
51.56 in August, but there was a marked improvement in expectations for export
orders, which rose by 20.47 from July to 41.50 in August.
The
outlook for long steel product prices fell by 4.17 points to 62.50, while
expectations for flat steel prices deteriorated by 13.81 points from July to
77.86 in August.
Expectations
for crude steel production was down just 3.54 points on the month before, while
steel inventories held by traders were generally expected to keep falling.
“Chinese
mills and traders are enjoying high prices and strong margins and are therefore
generally upbeat about market conditions. The reason the headline index this
month isn’t as high as might be expected is because steel prices have risen so
much recently that they feel this could deter appetite for purchasing material.
That said, most survey participants expected steel prices to remain high in the
month ahead,” said Paul Bartholomew, senior managing editor of steel & raw
materials for S&P Global Platts.
“Though
there has been a marked improvement in the outlook for new export orders in
August, it is more a case of ‘things can’t be as bad as last month’. This
doesn’t necessarily mean that China’s steel exports are set to surge again,”
said Bartholomew.
“The
outlook for long and flat steel product prices fell this month but both came
off high readings in July. Steel production is expected to remain fairly stable
over the next month, and mills will need to decide whether to carry out summer
maintenance or keep output high to take advantage of the strong market,” he
said.
The CSSI
is based on a survey of 75 to 90 China-based market participants including
traders and steel mills.
According
to S&P Global Platts price assessments, separate to the CSSI, the Platts
China export hot rolled coil price averaged $493.1 per metric ton (mt), free on
board (FOB) China in July. This was up 11% on $444.3/mt FOB in April.
Which has been in the line for many years and
is known as one of the leading exporters of metal materials in China since
2002.
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