China steelmakers expect strong Q2 demand, drop in iron ore prices - association

BEIJING, March 18 (Reuters) - China’s steelmakers foresee a strong second quarter on continued high demand and expect raw material prices to fall from recent peaks as supply tightness eases, the country’s steel association said on Thursday.

HBIS Group and Anshan Iron and Steel, two major steel firms in top producer China, were among those to take part in a seminar organised by the China Iron and Steel Association (CISA) to discuss recent developments and future trends.

Participants expected the April-June period to see a sharp ramp-up in activity in China’s construction industry, a key user of steel, as well as a drive by manufacturers to stock up on steel products, CISA said in a summary of the meeting.

Chinese steel mills boosted output by 13% year-on-year in the first two months of 2021, betting on strong construction and manufacturing demand in the upcoming peak season, although sky-high raw material costs largely eroded margins.

The steel industry should pay attention to whether its downstream clients are able to pass on the high cost of the metal to their own customers, since that will directly affect demand, CISA said.

Steel users such as home appliance manufacturers have already raised prices for their products due to high procurement costs.

China’s iron ore futures rose 2.5% to 1,089 yuan ($167.35) a tonne on Thursday, not far off the all-time peak of 1,185 yuan struck on March 3 on supply concerns. Coke jumped 2.5%, although it is now 23% below a record high seen on Jan. 6 after a 67% surge in 2020.

As fundamentals improve, “iron ore prices may fall from high levels and coke prices are expected to return to a reasonable range,” CISA said, without elaborating.

Steel inventories are expected to decrease in the second quarter, it added.

Stocks of five main steel products held by traders in China stood at 21.7 million tonnes as of Thursday, according to Mysteel.

$1 = 6.5075 Chinese yuan renminbi Reporting by Min Zhang and Tom Daly. Editing by Andrew Cawthorne and Mark Potter