There is room for some uncertainty in the demand and price outlook for construction steel in Q4 as the market continues to be influenced by China’s dynamic zero COVID-19 strategy, which hit consumption levels in multiple major cities in the country.
China’s appetite for construction steel is likely to remain weighed down by delayed operations and project funding, and the resulting cash flow issues despite the government’s efforts to stabilize the economy and restore market confidence.
Market participants said that a seasonal rebound in steel demand was not seen in September despite consumption being low throughout a hot summer and the rainy season over Q3.
Most Southeast Asian markets also reported weak domestic demand in Q3 and prices staying comparable in other markets led some mills to actively seek export opportunities. S&P Global reported nearly 500 billet offers from the Southeast Asian market in Q3, over 80% of which were from ASEAN countries.
Market participants said they expect steel consumption in China to remain weak through the end of Q4. Some steel mills will also cut utilization of finished steel capacity by either halting production lines or undergoing forced production maintenance, sources said.
Weaker scrap prices in Q4
The Asian scrap market is also unlikely to be on firm footing in Q4, with the production and procurement decisions of steel companies likely to be dictated by rising energy prices in Europe and slowing steel demand in Asia over the coming months.
Asian scrap prices saw a V-shaped recovery at the end of Q3, as falling prices in July were followed by a strong rebound in August amid higher buying from South Korea to maintain inventory levels. Platts observed 51 deals, bids, offers and tradable indications in August for seaborne trades to South Korea, rising from an average of 27 such indicationsper month in Q2.
The Japanese market was also supported by South Korea’s purchases, with Platts assessing the price of H2 grade scrap FOB Japan at a Q3 peak of Yen 49,800/mt Aug. 31, up 31.9% from Yen 37,750/mt Aug. 3.
Post time: Oct-12-2022