Fall of the steel market in China

The outlook for the Chinese market has turned grim in several years as high steel production, falling new orders and rising inventories put strong pressure on domestic steel companies.

The S&P Global Platts China Steel Sentiment fell to 8.42 out of a possible 100 in June, the index's second-lowest since early 2013.

The CSSI, which measures the forecast for new steel orders for next month, fell 4.37 from 12.47 in May. It was the lowest since February 2015 and the fourth consecutive monthly decline.

A reading above 50 indicates an expectation of increase /expansion, and a reading below 50 indicates a decrease /contraction.

The forecast for steel prices fell 11.77 points from the previous month to 14.22 in June, the weakest since November last year.

Market participants determined the expected volume of crude steel production, which will remain at the level similar to May, next month, but saw that inventories began to increase due to the decrease in demand for raw materials. June-August is a seasonally quieter period due to hot weather slowing construction activity and heavy rains in southern China that are holding back demand.

Rising raw material prices have also affected the margins of many smelters due to higher costs as the 62% benchmark iron ore reached $ 112 /t CFR China, the highest since April 2014. Some factories in northern China in a province like Hebei are losing money at current price levels.

At this stage, mills are not talking about a cut in steel production at Chinese mills, as most market participants expect Beijing to stimulate the economy in the third quarter by easing monetary policy and investment in infrastructure.