Mills Face Downward Pressure

Domestic steel prices are bound to fall in May, if not in April, said an industry expert. Some end-users in Shanghai have suspended their bookings due to difficulties derived from higher ex-works prices than transaction prices. The scenario of adverse business conditions steel mills experienced in May and June last year is likely to be duplicated in the first half of this year.

He predicated average steel mills would face greater downward adjustment pressure in April, when large mills may prefer to offer discounts to distributors. A sizeable downward price revision would take place in May.

Iron ore contract prices will almost certainly hit a new record in the second quarter, rising by 16 to 20 percent from the previous three months. Steel stocks across China continued to rebound in February, amounting to 18.50 million tons for five principal steel products, up 3.78 million tons from late January. Inventory risks are accumulating, posing a latent problem to mills' operations in the months to come. Good news is the government determination to build 10 million government-subsidized housing units this year, which will underpin basic demands for steel products in the latter half of this year.