Steel prices to rise further amid a significant recovery in the manufacturing sector

SHANGHAI, Sep 3 (SMM) — Operating rates of blast furnaces (BFs) at Chinese steelmakers extended declines as decreased profits prompted steel mills to conduct maintenance.

An SMM survey showed that operating rates of BFs slipped 0.2 percentage point on the week to 89.6% in the first week of September, following a decline of 0.4 percentage point in the previous week.

Operating rates of BFs at Chinese steelmakers

Steel prices increased as China’s major steelmaking city Tangshan issued production restrictions and as the US Federal Reserve Chairman Jerome Powell said last week that the central bank will allow inflation to run higher than 2% for some time to support the labour market and the economy hit by the coronavirus pandemic.

Recently, market talks came that Shanxi Taiyuan will shut down coke ovens of 4.3 meters high before October 31, and an iron and steel company in Hebei Xingtai suspended production from August 31. Coke prices are expected to be strong in the short term on the backdrop of firm fundamentals and environmental protection.

On the demand side, construction conditions improved significantly as the weather is getting better in September, and manufacturing activities also expanded. Sales of heavy trucks stood at 128,000 units in August, up 75% from a year ago, and sales of excavators are expected to reach 20,800 units in August, rising about 50% on the year.

Shrinking supply and increasing demand are likely to further boost steel prices, but high inventories and the uncertainty of US-China relations will limit the increase.