< Demand recovery and tight supply push China's steel prices to new highs(1)
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Demand recovery and tight supply push China's steel prices to new highs(1)

[2021-08-31]

Following another record of crude steel output in 2020, China's crude steel output will continue to grow in 2021. The Chinese economy has benefited from the support of the Chinese government to promote new infrastructure construction and expansionary monetary policy. The growth of the construction industry is the continuous driving force for China's economic growth in the first half of 2021. Beginning in the second half of 2021, weak credit growth and the gradual weakening of stimulating macroeconomic policies may cause a slight slowdown in China's economic growth.

Since the outbreak of the new crown pneumonia epidemic, the shift of China's commodity consumption to a higher level, as well as the downturn in industrial production in economies such as the United States and the European Union, have supported a significant increase in global demand for Chinese exports in the past year. In the first four months of this year, China's exports have increased significantly year-on-year, reaching the highest level since 2017. As the world's major economies will continue to open up in the second half of 2021, service industry consumption will rebound, which will ease this trend, which may have an adverse impact on China's manufacturing industry.

The expectation of China's reduction in domestic crude steel production seems to have intensified demand growth in the first half of 2021. At the same time, concerns about the disruption of Australia's iron ore trade have intensified, boosting short-term steel demand.

The combined effect of the above factors has caused the prices of hot-rolled coils and rebars, which are widely used in the construction and manufacturing industries, to hit record highs in the Asian spot and futures markets. This includes China's domestic hot-rolled coil and rebar spot prices, which were recorded at the beginning of May, reaching 6,720 yuan/ton (1041 US dollars/ton) and 6,259 yuan/ton (974 US dollars/ton), respectively.

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