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Steel Demand Would Remain Suppressed by the COVID

iconMay 16, 2022 13:07
Source:SMM
Looking forward, market confidence is constantly being depressed by the impact of the pandemic and rainy weather, as well as continuous fermentation of international bearish factors and the increasing downward pressure on domestic economy, and the demand for HRC will remain under pressure in the short term.

SHANGHAI, May 16 (SMM) - Finished product supply increased only slightly last week amid poor profit and crude steel output cut targets. Although the prices of raw materials dropped recently, the profits of steel enterprises were still below the break-even point. It is expected that the output of rebar from FB steel mills will remain stable month-on-month in May, while the output of EAF steel mills will fluctuate at a low level. In other words, the total rebar output will stay low in the near term. The 39 steel makers in China had planned to produce a total of 15.33 million mt of HRC in May, up 2.16% or 324,300 mt from the realised output in April, flat MoM, according to SMM survey.

Repeating pandemic & heavy rains in the south constantly suppressed the release of steel demand. In terms of rebar, the impact of the pandemic still suppressed the overall demand. On the other hand, although the construction work was delayed by the heavy rains in south China, the meteorological department predicts that the rainy season will end around May 15 when the weather will improve. Therefore, the construction projects will release their demand in a concentrated manner by then, reviving downstream demand to some extent. In terms of HRC, despite improving pandemic situation in east China, the number of confirmed COVID cases in Beijing and other places increased. And the demand is likely to be further contained by the coming wet season across east China and South China. As such, the demand last week was relatively flat from with the pre-Labour Day holiday level. Looking forward, market confidence is constantly being depressed by the impact of the pandemic and rainy weather, as well as continuous fermentation of international bearish factors and the increasing downward pressure on domestic economy, and the demand for HRC will remain under pressure in the short term.

Ore prices are likely to drop this week on sufficient supply & crude steel production cut target. Affected by factors such as the international macro monetary environment and lower-than-expected downstream demand, the market sentiment was relatively pessimistic. DCE iron ore futures prices fell sharply for three consecutive days, and then maintained downward potential for lack of upside momentum. The spot prices of PB fines in Shandong dropped slightly by 50-60 yuan/mt on the week. Looking into this week, domestic BF steel mills maintained normal production albeit operation losses to varying degrees, and pig iron output remained largely unchanged. However, with the increase in overseas shipments, it is expected that the arrivals at ports in China will continue to increase, and the supply will tend to be sufficient. It is expected that the ore prices may drop this week.

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