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Domestic steel prices set to rebound in Q4 amid easing pressure from Chinese market
vietnamnews - 10/4/2024 9:48:44 AM
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Steel production in China decreased to 77.9 million tonnes in August from nearly 83 million tonnes in July. Its steel imports dipped by 9 per cent year-on-year in July.
 
 
Inside a warehouse of Hoa Phat Group. — Photo hoaphat.com.vn
 
Prices of domestic construction steel and hot rolled coil (HRC) are expected to recover significantly from the fourth quarter (Q4), boosting industry profits, according to experts. 
 
Construction steel and HRC prices in the Vietnamese market saw a 32 per cent and 28 per cent decrease respectively in the first eight months of 2024, according to data from MB Securities (MBS). 
 
These drops were due to weakened demand, largely driven by a sharp decline in steel consumption in China and its real estate crisis.
 
MBS anticipates the real estate sector crisis to continue until the close of 2024, with steel price potential hinging on supply dynamics as steel mills start cutting production, tightening supply in Q4 2024.
 
In China, the government is restricting licences for coal-based steel mills to uphold environmental standards and limit new supply. 
 
Meanwhile, steel producers in Hebei and Tianjin have trimmed production by 20 to 30 per cent as gross profit margins hit a notable low of negative 4 per cent, the lowest in five years.
 
Consequently, steel production in China decreased to 77.9 million tonnes in August from nearly 83 million tonnes in July, data from the China Steel Association (CISA) shows, while its steel imports dipped by 9 per cent year-on-year in July.
 
Tightening supply may have a positive impact on steel prices. In September, Chinese construction steel prices surged by 4 per cent from the August low. As a result, analysts anticipate a rebar price recovery from Q4/2024 in China due to decreasing oversupply pressures.
 
The recent announcement from China’s central bank about its biggest stimulus package since the pandemic is also providing some support. 
 
Although the stimulus measures should stop steel market conditions from worsening, they are unlikely to boost short-term demand, as this year’s steel output remains on track to come in lower than 2023, ANZ analysts said.
 
Steel rebar futures on the Shanghai Futures Exchange rose to above CNY3,417 per tonne on Monday, reaching the highest level since July 3. 
 
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