MNI:Limited Scope For China Q4 Steel Demand Recovery– Analysts
MNI (BEIJING) - Chinese steel prices in Q4 are expected to increase 10% q/q on average as manufacturing demand picks up and despite recent disappointing stimulus measures, but further data and more certainty on fiscal support is needed to ensure a sustainable rebound, local analysts told MNI.
A further manufacturing recovery in Q4 will help drive steel consumption higher and recalibrate supply and demand, with the sector’s appetite likely growing about 5% in 2024 compared with an overall 3% decline, said Wang Guoqing, director at the Research Center at Lange Steel Network, adding average steel prices should climb 10% q/q in Q4.
Consumption of products commonly used for manufacturing, such as hot-rolled sheets and medium-thick plates, had increased by 10.7%, and 18.2% m/m in September, she said, while construction demand also saw a 13.7% m/m boost. “There has been a notable recovery in sales and production of automobiles and home appliances which has stimulated demand for plates,” she added, noting government subsidies for equipment upgrades and consumer good trade-ins had driven the increase.
China's retail sales rose 3.2% y/y in September to hit a four-month high, accelerating from August's 2.1%, while industrial production increased 5.4% y/y in September to mark the highest reading in four months, rebounding from the prior month's 4.5%.
However, while flat product prices were expected to recover further in Q4 as demand improved relative to supply, overcapacity would persist and limit increases, argued Linda Lin, principal steel analyst at research firm CRU.
Shanghai rebar rose to CNY3447 a tonne in mid-Oct from CNY2758 in mid-August buoyed by improved demand, government stimulus expectations and Federal Reserve rate cuts.
Market sentiment had driven the rally and the scope for higher consumption remained limited, Lin noted, pointing to last week’s one-day 4% drop to CNY3239 per tonne on disappointing property stimulus measures.
“We need to assess the October data further, but some steel mills are reporting stronger demand,” Lin said, adding Baowu Steel recently increased the ex-factory price for plate steel in November by CNY500 a tonne on stronger orders.
MARKET INDICATORS
Lange Research’s steel distribution industry PMI will likely hold above 50 in October and November, after rising over the breakeven handle in September for the first time since April, Wang continued. “However, seasonal demand and climate factors may move the index below 50 during December,” Wang added.
EXPORTS
China's 2024 steel exports reached 80.7 million tonnes from January to September, up 21.2% y/y, Wang said, noting shipments will likely break above 100 million tonnes this year, compared to 2023’s 92.3 million tonnes, and despite slowing over Q4.
September saw exports rise 6.9% m/m to 10.1 million tonnes, the highest monthly volume since 2016, Lin added, noting a rush of Vietnamese July orders ahead of Hanoi’s decision to impose tariffs on China had driven the volume.