Report by Wang,Shang Yi
China’s steel market witnessed a significant surge this week, with iron ore futures rising by over 4% and other steel products following suit with a price increase of over 2%. However, Taiwanese wire rod manufacturers express skepticism about the sustainability of this upward trend, despite the initial surge led by China. While the Chinese stock market has shown signs of recovery in recent days, the international market demand still needs to strengthen, making it uncertain whether the upward momentum can be sustained.
Industry players believe that the key to the success of steel products lies in demand. However, both Taiwanese and international steel companies have been unable to meet orders for several months, making it difficult for prices to continue rising. Moreover, it may not be easy for downstream buyers to pursue higher procurement prices in the short term, as Taiwan Steel has just announced its third-quarter wire rod prices.
According to local Chinese news analysis, the recent recovery in the Chinese steel market can be attributed to two factors. Firstly, Chinese Premier Li Keqiang expressed confidence in driving the Chinese economy in the medium to long term during a recent speech. He also emphasized that the second-quarter economic growth rate is expected to surpass that of the first quarter, with a projected economic growth target of 5% for 2023.
The second factor is related to China’s real estate policies. Restrictive property purchase policies have been gradually relaxed in some third and fourth-tier cities in China. Local steel market analysts predict that first and second-tier cities may follow suit in loosening real estate policies, thereby stimulating domestic steel demand.
Overall, there are signs of improved market sentiment locally, but the overall trend of increasing demand has not yet been reflected. This is evident in the relatively conservative spot prices despite the high surge in Chinese futures prices. From the perspective of steel mills, the rapid price increase at this stage does not help with demand, primarily due to the insufficient global economic recovery momentum. This year is considered a buyer’s market, and steel mills can only wait for demand to rebound while proceeding cautiously.
The Taiwanese market is also concerned that if Chinese steel mills reduce production capacity and slow down, it may lead to a significant overflow of low-priced steel products, which would be even more detrimental to the international market. It is hoped that local steel mills will carefully evaluate the situation before deciding on any increase in production capacity.
Coverpicture by PhotoAC
