Iron ore prices should be well supported in the second quarter, despite the slow recovery in downstream steel demand, as Chinese mills are expected to lift steel output, according to the latest S&P Global Platts outlook survey.
Some 38% of survey respondents expected iron ore prices to remain in the $80-$90/mt CFR range, while 28% saw them lower at $70-$80/mt. Half of the survey respondents believed their iron ore requirements will increase in Q2, while 28% thought they would be at similar levels to Q1. Only 13% saw their iron ore needs falling, the survey found.
Despite soaring finished steel inventories in China, 72% believed crude steel production would increase in Q2. The finding is in contrast to the previous survey, when more than a third of Chinese mills said they were considering cutting production.
It also reflects optimism in the domestic steel market, notwithstanding that only a quarter of respondents expected demand to normalize by the end of April. Some 35% believed the market will fully recover by the end of May and a further 25% by the end of June.
“We see the Chinese market returning to normal at the end of April but there is much uncertainty due to the virus outbreak outside of China. No country can fend purely for itself as the steel market is global,” a mill official in northern China said.
The survey found that 37% of respondents expected steel demand growth to come mainly from infrastructure, while 19% thought construction would continue to be the key demand growth segment. Steel market participants expected the Chinese government to largely use infrastructure to support the economy in the wake of the coronavirus outbreak.
Very few respondents thought manufacturing would significantly drive demand for steel in Q2 and this was reflected in the weak outlook for hot-rolled coil margins. The majority, 44%, expected domestic Chinese HRC margins to average a slim Yuan 100-200/mt ($14-$28/mt) in Q2, with 20% seeing them at Yuan 300-400/mt.
“The HRC market will depend mainly on demand from appliances and auto and we’re not at all confident that will recover strongly in Q2, though pent-up demand should flow through in the second half of the year,” a mill contact said.
The outlook for rebar margins was extremely bearish, with a quarter of respondents seeing margins of Yuan 100/mt or below. Construction sector demand is expected to be softer in 2020 as the Chinese government has said it will not use real estate to stimulate the economy.
Platts spoke to 32 companies for the outlook survey over March 23-25, comprising Chinese mills, domestic and international traders and mining companies.
Source:Platts
The opinions expressed herein are the author's and not necessarily those of The Xinde Marine News.
Please Contact Us at：
admin@xindemarine.com
.gif)
