What Triggers Bullish Bets in Steel Market? SMM Reports

SHANGHAI, Jun. 29 (SMM) – On June 29, steel market in north China staged exorbitant gains, with billet and strip up 60 yuan, and 60-100 yuan in Tangshan, and up 70 yuan for hot-rolled coil in Tianjin.

What are factors behind the big rise?

Tangshan Closes Another 4 Steel Mills for Overcapacity Elimination Target

Recently, environmental protection inspections have been stringent in Tangshan. Production at blast furnaces and sintering plants has been restricted by strict requirements. Meanwhile, steel output has been also curbed by capacity elimination efforts in Hebei. Earlier, Hebei Jinxi Steel Group Zhengda Steel said to stop production at its all lines before June 30, 2017. The company, having 450 M³ blast furnace, has monthly output of 40,000-50,000 tonnes of steel products, mainly steel strip. Xinli Iron & Steel has started its dismantling work.

China Iron Ore Market to See Upward Opportunity, SMM Reports

The deadline for eliminating “Ditiao steel”, a Chinese name for low-quality steel produced in intermediate frequency furnace with steel scrap as raw material, as well as rolled steel products produced with such steel as raw material, is nearing, also limiting output.

Moreover, some steel mills in Tangshan are taking capacity swaps, and before commission of new projects, suspension of old ones will also affect production, such as closing of three 450 m³ blast furnaces in Anfeng, and another three 480 m³ at one large mill.

Capacity elimination target and environmental factor triggered bullish bets in steel market, SMM concluded. In the short term, steel price in north China market is expected to hold firm, but downstream producers are turning cautious in purchases after sharp gains, which will cool down trading sentiment. So, steel market will largely remain under downward pressure in the off-demand period, and SMM will keep an eye on its development.

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