Investing.com — China’s steel market has seen a big drop in prices over the past week, according to analysts at BofA Securities. Steel export prices from China fell sharply, with hot-rolled coil (HRC) falling $31 per tonne to $449 per tonne, and rebar prices falling $28 per tonne to $462 per tonne.
This price reduction reflects the ongoing challenges facing China’s steel industry, exacerbated by weak demand and economic headwinds.
According to BofA analysts, cash margins for Chinese steelmakers have shown mixed results. Although cash margins for reinforcement improved slightly at RMB 35 per tonne, they remain negative at -RMB 45 per tonne.
Conversely, HRC margins deteriorated, declining by RMB112 per tonne to -RMB23 per tonne. The situation has prompted many steel producers to voluntarily curtail production, leading to a decline in capacity utilization of both blast furnaces (BF) and electric arc furnaces (EAF).
BF capacity utilization among the 247 steelmakers tracked by Mysteel fell 110 basis points to 85.92% between August 9 and 15. Broader market sentiment remains bearish, as highlighted by Hu Wangming, chairman of China Baowu Steel Group, who described current conditions in China’s steel sector as a “harsh winter” that could be “longer, colder and more difficult to bear than we are used to.” ‘. expected.”
“Continuing weak steel demand is unlikely to change in 2024-2025,” the analysts said. This is largely due to a severely depressed real estate market, which accounted for approximately 29% of China’s steel demand in 2023.
New construction projects have plunged 52% from their 2021 peak, and the trend continued with a 24% year-over-year decline in the first half of 2024. Continued weakness in infrastructure investment compounds the problem larger, because important projects are nearing completion and there are few new initiatives on the horizon.
In light of these factors, the outlook for China’s steel sector remains challenging, with continued pressure on prices and profitability expected in the short to medium term. BofA analysts suggest that unless there is a significant turnaround in demand, China’s steel industry could continue to suffer from low prices and lower margins well into 2025.
