Asian Steel Prices Turn Higher

16 March 2016

Steel prices in Asia have turned higher in anticipation of economic stimulus measures in China and reductions of excess capacity, but it remains uncertain how long the trend will continue.

Hot-rolled coils, which are widely used in construction materials and automotive steel sheet, now cost $300-315 a ton, 5-8% more than last month. The price is up 15% from the end of 2015 to the highest level in seven months.

Chinese steelmakers, which had been exporting at a brisk pace, have begun changing their posture. The growing view is that steel demand there will pick up because fiscal expenditures to improve transportation infrastructure have been hammered out at the National People's Congress.

As a result, iron ore prices temporarily surged last week and China's domestic steel prices jumped 10-20% from the prior month. With steel brokers giving priority to domestic supplies, trading companies say offers to sell overseas have stopped.

Construction typically picks up in China from spring into summer, so demand for steel readily emerges. In addition, the Chinese government has unveiled plans to reduce excess production capacity. The combined result is that February steel exports fell 17% from January to 8.11 million tons.

With the brakes being applied to Chinese exports, Southeast Asian steel users have raised purchase prices in order to ensure stable procurement. Japanese export prices have also begun moving up.

Asian steel prices have been in a downtrend since 2014 due to growing concerns that the Chinese economy was losing steam. Since the start of this year, however, prices have turned around as Chinese steelmakers have raised prices.

However, many in the industry are skeptical that the upward movement will continue. The iron ore market has already turned lower again and there are numerous factors that make steel product demand uncertain, including sluggish automobile sales in Southeast Asia and stagnant oilfield development caused by low crude prices.


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