China Hikes Steel Prices

China’s largest steelmaker, China Steel Corp., will increase the prices of steel products for delivery in the fourth quarter by an average of 5.6% due to higher raw material costs.

Earlier in the month, Japan increased its steel product prices, also due to higher input costs. But, sending a bit of a mixed message, last week Nippon Steel announced that it had reduced steel prices to Toyota Motor Corp.

China Steel Corp. will raise the prices for all products by an average of $37.8 per ton. Prior to the increase, the steelmaker had lowered prices by an average of 5.28% for third quarter shipments in response to fluctuations in major steel markets.

Global steel prices have been rallying due to better demand expectations as well as Beijing’s steel capacity cutbacks. While steelmakers have been benefiting from these higher prices, higher costs for steel input ingredients have impacted their margins.

According to China Steel’s vice president Lee Shin-min, “Customer inventory has remained low in China and restocking demand is likely to continue to stimulate steel prices in the fourth quarter.”

Previously, it was anticipated that China’s demand for steel would fall later this year as the country’s stimulus-related infrastructure spending programs came to a close. However; it seems as if the opposite case has unfolded. China’s demand for steel remains strong, as the country’s economy has recovered. Even without stimulus related infrastructure programs, it appears that the country will keep building.

On top of all of this, of course, is the country’s steel capacity cuts and the expectation that output will be reduced even more, later in the year, to combat pollution during the winter when thermal coal use clogs the country’s skies with smoke. These factors will all support steel prices.

Leia Toovey has a B.Sc. in geology from Simon Fraser University, and her degree had a focus on resource economics. Out of school, she started working in the booming mining industry of Vancouver, Canada, covering junior mining stocks and commodities including potash, copper, nickel, oil and gold. Then she moved to New York and worked as a commodities analyst covering a breadth of commodities, from the Baltic Dry Index through the softs. As a geologist she has a greater understanding of the exploration and extraction side of commodities, and how changes in technology and the depletion of resources impact pricing. At Economic Calendar she covers a variety of commodities, providing daily technical and fundamental analysis and assessing major market developments.