Currently, the blockade is still taking place in cities, including in some steel-producing regions. This means that steel production in April and in the second quarter in general may be lower than every year; while the peak summer construction period is about to begin.
According to Reuters, the two biggest problems in China right now are the government’s goal to once again limit steel production this year to a level lower than 2021, and at the same time accelerate economic growth in the second half of the year to achieve the annual target of 5.5%.
At first glance, the Chinese government’s call for a reduction in crude steel production by 2022 may seem to reduce iron ore demand, but it is possible that steel prices will increase, especially if there is a supply shortage in the second half of the year. .
At a press conference earlier this week, National Development and Reform Commission spokesman Meng Wei said the agency would ensure energy consumption and environmental control meet the requirements.
“The goal is to ensure that the national crude steel output will decrease in 2022,” Ms. Meng said. At the same time, she also added that some of the main regions subject to a sharp decrease in production include Beijing-Tianjin-Hebei and the Yangtze River Delta.
Steel production in March was 88.3 million tons, down 6% year-on-year, while first-quarter output was 243.4 million tons, down 10.5% year-on-year.
The first two months of the year saw a decrease in steel output due to pollution restrictions imposed before and during the Beijing Winter Olympics, while the blockade of many major cities to control the COVID-19 epidemic- 19 affected production in March.
Currently, the blockade is still taking place in cities, including in some steel-producing regions. This means that output this month and in the second quarter in general could be lower than every year; while the peak summer construction period is about to begin.
Therefore, some people expressed concern about the ability to meet steel demand during the peak construction months. Factories will be forced to increase capacity to supply enough goods for projects.
China’s GDP in the first quarter grew by 4.8%, slightly higher than market expectations but lower than the government target set by blockade policies to limit the spread of the COVID-19 epidemic. 19.
Overall, it seems that the outlook for iron ore depends on how successful China is with its COVID-19 elimination strategy, and if so, how much it will spend to meet its economic growth target. .
Spot iron ore prices to northern China were at $149.80 a tonne on Tuesday. Although it has cooled down after peaking on March 8 ($160.3/ton), this price is still up to 72% higher than in the last months of 2021.
Iron ore prices rose sharply because of tight supply problems due to unfavorable weather in Brazil, the world’s number two exporting country, hindering the mining and transportation process. In addition, the Russia-Ukraine conflict also affected China’s iron ore supply.
China’s iron ore inventories fell to 152.9 million tonnes in the week to April 15, from a recent high of 160.95 million in the week to February 18.
Rebar inventories were 8.95 million tonnes in the week to April 15, down from a recent peak of 9.22 million in the week to March 4.
However, rebar stockpiles are at a much lower level than at the same time in the previous two years.
This shows that steel mills are likely to have to increase output in the coming weeks.
The main issue for the steel and iron ore markets is timing. Experts expect a strong boost to infrastructure and construction spending to boost the GDP growth target. The question is when will this start?
T&G International Joint Stock Company
Address: 352 Hue Street, Le Dai Hanh Ward, Hai Ba Trung District, Hanoi
Hotline: 0345786803
Email: hrm@tginterjsc.com
Website: http://tginternationaljsc.com
