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China’s CRC steel demand to remain subdued in H2 on weak car sales forecast: traders

China’s passenger vehicle market will remain challenging in the second half of 2020, despite showing some signs of improvement from H1, a key industry association forecast this week, which steel market sources said meant demand for cold rolled coil was unlikely to see any substantial increase before year end.

Passenger car retail sales are forecast to fall 11% year on year in 2020, despite sales in H2 improving after a 22.5% year-on-year decline in H1, the China Passenger Car Association forecast on July 21. This decline would follow a 7.4% year-on-year fall in domestic car sales in 2019, CPCA data showed.

The association said that while the worst of the COVID-19 demand destruction was over for the passenger car market, downward pressure still lay ahead due to decreased household incomes and the risk of a pandemic resurgence at home and abroad.

CPCA expected China’s car retail sales in July to edge higher on a year-on-year basis but be lower than in June as sales promotions by local governments and car retailers gradually came to an end.

Steel traders said that while infrastructure-related China’s domestic manufacturing sector continued to recover in July, benefiting HRC and plate, there was little sign of improvement in CRC demand from car makers.

As a result, the spread between the domestic prices of CRC and HRC in the Shanghai spot market narrowed to Yuan 365/mt mid-week from Yuan 390/mt ($56/mt) in late June, S&P Global Platts data showed.
Source: Platts

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