SHANGHAI, Aug 1 (SMM) – Hot-rolled steel prices in the Chinese market are likely to strengthen in the short term, buoyed by the government’s “proactive” fiscal stance and production limitations at mills on environmental initiatives, SMM believes.
Market sentiment improved significantly after policymakers pivoted from restraining debt and towards injecting stimulus into the economy. The cabinet pledged to ensure “appropriate” credit growth last week.
Many local governments issued their own plans to improve the environment and imposed production limitations on mills. This weighed on supplies of hot-rolled steel. Data from the China Iron and Steel Association (CISA) showed that average daily output of crude steel at its member mills dipped 0.92% from July 1-10 to 1.96 million mt during July 11-20.
Costs of purchasing materials from mills shrank as some major mills provided more subsidies to traders. Purchasing costs for traders declined 50-100 yuan/mt in July.
Overall hot-rolled steel inventory across China, including social and in-plant stocks, shrank 1.2% from a week earlier to 3.16 million mt as of Thursday July 26. This reversed the increase for seven consecutive weeks.