STEEL PRICES IN CHINA AT LOWEST SINCE APRIL 2009 -
MEPS INTERNATIONAL LTD
The MEPS “All Steel Products Composite”
dealer price in China hit a 53 month low in September this year. With weakening
demand and continued oversupply, the October figure is likely to be down even
further. In fact, it may be January before any notable recovery takes place.
Much of the steel price erosion in China has been the result of significant cuts
in the cost of steelmaking raw materials, which commenced in the early months of
this year. The reduced input costs have not improved the financial prospects of
the Chinese mills, however. Many of them are suffering from large debts which
need to be funded. Furthermore, a significant number are facing huge costs for
emission controls and other environmental issues. Subsidies are keeping many
steel companies in business.
The growth rate in local demand is slowing. The steelmakers are keeping output
at a reasonably strong level by increasing the volume of exports. These are less
profitable than domestic sales. Oversupply is preventing the steel producers
from increasing their margins.
Chinese domestic steel prices have been in retreat for the past twelve months.
The MEPS “All Products Composite figure” for China declined by 15 percent
between September 2013 and 2014. Chinese steel selling values have been below
the figures recorded at the time of the global economic crisis for the last five
The situation in China is in stark contrast to that in all the other major steel
producing parts of the world. The downturn in other regions has been much less
dramatic during the last twelve months.
In North America, strong economic growth has prompted higher steel demand. This
has helped the steelmakers to push up average prices for their products by 5
percent over the past year. This developed in spite of substantial decreases in
international prices for steelmaking raw materials.
Since September 2013, the average domestic steel price in the European Union has
declined by 6 percent. This reduction is smaller than that which occurred in
China, despite weakness of the euro relative to the US dollar – making raw
materials more expensive in the national currency.
The savage reduction in Chinese domestic prices so far this year, and probably
in the months to come, will have serious consequences for steelmakers in other
parts of the world. Exports from China will become more competitive in
international markets. In turn, this will put negative pressure on local steel
selling values and threaten any recovery in demand.
China Steel Review - September Edition
Also See: www.worldsteelnews.com
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