China Steel Prices May Fall Amid High Inventories, Mirae Says
Friday, 17 February 2012 | 11:00
Steel prices in China may fall this month as high inventories at traders and end-users signal weak demand, Mirae Assets Securities Co. said.
Inventories are at a 44-week high and stockpiles held by Chinese machinery traders have climbed to a record, Mirae Assets analysts Shirley Zhao and Henry Liu said today in an e-mailed note, without giving details.
Baoshan Iron & Steel Co., China’s biggest publicly traded steelmaker, raised its products prices by at least 150 yuan ($24) a ton for March delivery, the second increase in three months, the company said Feb. 10. The market usually expects steel demand to rise as construction resumes after the weeklong Chinese New Year holidays, which ended on Jan. 29 this year.
“Construction demand for machine power remains weak, with a disappointing improvement post the Chinese New Year, due to insufficient cash injection from local governments into infrastructure projects,” Mirae Assets said in the note. “The current rise in ex-factory prices is mainly being driven by steel mills rather than end-user demand. We believe steel mills will have to compensate traders later when prices fall.”
China’s automotive inventory stood at about 4 million units at the end of last year, higher than the normal level of 2 million to 2.5 million units, the analysts said.
The prices of hot-rolled coil, a benchmark product, traded in China at 4,239 yuan a ton today, little changed from 4,219 yuan on Dec. 30, according to researcher Beijing Antaike Information Development Co. Prices have fallen 15 percent from a year earlier.
Annualized steel output in China was about 612 million metric tons in January, down 3.2 percent from a year ago, Mirae Assets analysts said.
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