China Iron & Steel Association Hopes For Stable Steel Prices In Fourth Quarter

12 October 2016

The China Iron & Steel Association hopes prices will remain stable in the fourth quarter, secretary general Liu Zhen Jiang told S&P Global Platts on the sidelines of Worldsteel-50 in Dubai.

“We will try to avoid a big drop in steel prices because if we see a new price drop the economic efficiency we see at the moment will be badly impacted,” Liu said.

Chinese steel demand is seasonally weaker in the fourth quarter, Liu said, suggesting CISA will remind its members “to pay more attention to balancing supply and demand”.

The correlation between iron ore and steel is currently more manageable than before, he said.

“We are happy to see the mills and miners more wise and more rational and we hope this stability and correlation between steel and iron ore remains in the coming months.”

The rise of coking coal and coke costs poses a real challenge for mills, but this pressure should support steel prices.

China is on target to reduce capacity by 45 million mt this year, and could possibly surpass this.

Next year’s reduction target is likely to be no less than this year, Liu said. “Next year will be even more difficult for China in restructuring overcapacity, because we believe the target will be even higher than this year. Reducing overcapacity is a long and painful process that will bring about a big task in relocation of hundreds of thousands of workers.”

Overcapacity is a hot topic for the global industry, and China had made “great efforts in that regard”, Liu said.

“It is a pity for us to see so much talk from some about reducing overcapacity when they have done nothing,” he said, adding: “Some sides have spoken a lot but done little”.

There will be more mergers like Baosteel and Wuhan going forward in the continuing restructuring of the industry.

“They have reasons to join hands, they have similar product portfolios, the merger will help to optimize the product mix while in the meantime reducing overcapacity,” Liu said.

T.V. Narendran, managing director of Tata Steel India and Southeast Asia, said China was “far more serious than ever” about cutting its overcapacity, citing the government’s sharper focus on environmental commitments.

“The government is really targeting those not invested in cleaning up their acts,” Narendran said, adding China had set aside cash to help redeploy workers.

He also questioned the extent of China’s overcapacity, saying that in the “best of times” the industry runs at 80-85% of nameplate production, meaning there is always a theoretical oversupply.


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