Domestic demand may be weaker in the June-September period due to seasonality, high selling prices and the negative impact of Covid-19.
Steel demand weakens due to seasonality, high prices and Covid-19, expect steel prices to continue to fall
On July 11, steel price of Hoa Phat, a brand that accounted for 34.5% of the national construction steel market share in the first 5 months of this year, was at VND 16.6 million/ton for CB240, 16, 9 million VND/ton with D10 CB300 steel. These prices decreased by 8.1% and 5.3% respectively compared to May 12.
The latest industry report from Rong Viet Securities (VDSC) on the domestic steel situation shows that in the construction steel segment, sales volume increased sharply in the first 5 months of the year. Specifically, sales of construction steel in the first 5 months of the year increased by 14% over the same period last year and reached 4.6 million tons, of which domestic consumption increased by 12% over the same period. After that, steel consumption weakened rapidly in June.
The rainy season and the new wave of Covid-19 caused construction activities to stagnate, leading to a decrease in consumption. In addition to weak demand from the construction industry, agents also faced difficulties in consumption because steel prices increased from 14.5 million dong/ton in March to 17.5 million dong/ton in June (excluding VAT). VDSC expects steel producers to reduce selling prices in July, before adjusting for the following months under the pressure of increasing raw material prices.
Two factors may cause world steel prices to drop in July
CNBC reported that the shares of many steel companies in the world are under great pressure because of the prospect that steel prices may fall in July. Two factors that can cause steel prices to fall are that Russia will increase exports in the near future and Two major steel markets, China and India, are in the process of adjusting many policies related to this important item.
In the third quarter, India’s construction activity slowed down, leading to steel bars coming under downward pressure. In addition, high inventory is also a factor affecting the price. Besides, the country is entering a low quarter in terms of steel demand because of rainy weather.
Previously, steel demand in India had weakened due to the 2nd wave of Covid-19. Consumption of finished steel fell in May and marked the 5th consecutive month of decline.
Similarly, SP Global also said that July is the time when steel demand has dropped the most of the year in China because hot weather and heavy rain make construction activities sparse.
In 2020, China is the world’s largest steel producer with 1.053 billion tons. The countries behind China are India (99.6 million tons), Japan (83.2 million tons), Russia (73.4 million tons), the US (72.7 million tons).
Source: synthesized by VITIC
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