Chinese steel mills and traders are expecting new orders to rise at home in the short term, while exports fall — with the G20 summit playing a strange role in boosting production.

A survey of market participants by Standard & Poor’s Global Platts found that the domestic market would probably remain the main focus, with steel inventories low.

Paul Bartholomew, senior managing editor at the commodities and energy analysts, said a pick-up in production “could put downwards pressure on prices”.

Managers expected this surge to result in part from China’s hosting of the G20 leaders’ meeting in Hangzhou this month.

Mr Bartholomew said Beijing was always keen to make sure the skies were clear for international events.

“Steel mills within a 300km radius of Hangzhou were told to cut emissions — and therefore crude steel production — from the end of August to reduce pollution ahead of the G20 summit,” he said.

Hangzhou was at the centre of a thriving industrial region and the reopening of those mills would see a spurt in production.

Mr Bartholomew said that Chinese domestic steel prices had risen by about 35 per cent since the start of 2016, which in turn had pushed up export steel prices.

Most of the steel was sold into Southeast Asia and South Korea “and customers there start to get concerned if prices get too high, particularly if they think China’s domestic market could later soften and prices could retreat”.

“China is still extremely competitive on cost, but it is getting some competition from countries with weaker currencies — even Russia has been making sales in Asia,” he said. “China has the biggest export capacity of course, and a lot of Southeast Asian countries rely on Chinese imports.”

Mr Bartholomew said that despite the longer-term pushback against Chinese exports for being priced too low — provoking anti-dumping measures in many industrialised countries including Australia — in the medium term, China’s steel exports may suffer more in its bigger markets because the exports were priced too high.

 

Source : theaustralian.com.au

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