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Chinese steel price hike subsides


A recent jump in the price of various steel products in the domestic Chinese market has proved short lived, leaving many market participants apprehensive.

Last week, a comprehensive index that monitors the price of delivered steel products in China jumped 2.62 per cent to 96.22, according to domestic Chinese consultancy and data provider MySteel. In Shanghai, Jinan and other areas, the price of steel products used in construction jumped 20 yuan to 160 yuan a tonne over the course of last week.

The current "environmental storm" is starting to have an impact on supply as a few steel mills that don't meet various environmental standards cease production, according to the Xinhua report. This also helped to lift the price for construction steel in the Beijing, Tianjin and Hebei region. However, after prices jumped, demand failed to keep pace, prices started to retreat and trading contracted. The price volatility has left market players very cautious.

Despite the recent short-lived jumps in domestic steel prices, the global iron ore price has continued to weaken. According to the article, this means that most Chinese iron ore miners are now operating at a loss. In January this year, domestic miners were operating at a utilisation rate of 53 per cent, according to data quoted in the Xinhuareport.

All of China's large and medium-sized steel mills are expected to make a loss in the first quarter of 2015 according to comments made by Liu Zhenjiang, party secretary of the China Iron and Steel Association (CISA), at a steel industry forum on the weekend. Liu said that "this also reflects that the downward pressure on the economy has continued to increase from the end of last year, demand has weakened and the situation in relation to declining profitability has worsened", according to a report in yesterday's China Securities Journal.

China plans to publish an action plan aimed at reining in excess production in June, according to remarks made by Luo Tiejun, the head of the Ministry of Industry and Information Technology's (MIIT) raw materials department, at the same industry forum. Luo said that policymakers aim to cut as much as 80 million tonnes of excess steel capacity over the next three years.



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