The steel market in China remains under significant pressure due to rising raw material costs and the expected seasonal decline in consumption during the summer period, despite the increase in domestic prices for metal products observed since the second half of April.
This is reported by Finway
Geopolitical factors and their impact on industry profitability
The monthly report from the China Iron and Steel Association (CISA) emphasizes that the situation in global markets remains uncertain due to escalating geopolitical risks. The rise in energy prices, triggered by the conflict in the Middle East, as well as the increase in the cost of key raw materials for steel production, negatively affect the profitability of metallurgical enterprises.
If the conflict in the Middle East escalates further and high oil prices persist, as noted by CISA, shipping rates and energy costs may rise, further complicating the financial situation of steel companies.
Seasonal decline in consumption and climatic factors
In the near future, China is expected to enter the summer interseason, which traditionally accompanies a decrease in steel demand. In particular, the rainy season in southern regions and elevated temperatures in the northern part of the country may lead to a reduction in construction activity, which, in turn, will impact the consumption volumes of metal products.
“The balance of supply and demand may worsen again if steel demand declines seasonally, and factories are unable to adjust their production accordingly.”
The report emphasizes that steel producers need to closely monitor market changes, respond promptly to demand dynamics, and consider the situation in the Middle East while continuing to limit production and reduce inventory levels.
At the same time, it is predicted that the soft monetary policy of the Chinese government, along with accelerated fiscal spending, will provide structural support for steel demand in the second half of the year.
China also declares its intention to reduce carbon emissions intensity by more than 65% by 2030 compared to 2005 levels, increase the share of non-fossil fuels in the energy balance to 25%, and comprehensively improve energy efficiency in key industrial sectors, including the steel industry.
The implemented policy measures, according to CISA, will contribute to limiting the production capacities of integrated enterprises, accelerate the gradual phasing out of outdated plants, and help stabilize the balance of supply and demand in the steel market.