(Yicai Global) Jan. 4 – Chinese steel prices are facing a certain level of downward pressure due to the downbeat business climate in the Chinese market late last year and into the new year. The fluctuations of steel prices last year, likened to a roller coaster by market analysts, may repeat this year.
Steel prices may still go up in this full year, while reduction of overcapacity has been pushed forward and so has destocking in the steel industry but this does not necessarily mean there will be a steel bust, industry experts told Yicai Global.
Due to heavy smog and ensuing government regulations, all major steelmakers cut production volume in December last year, said Huang Qizhi, an analyst at Northeast Securities.
Steel prices rose sharply in 2016 but from a long-term perspective, current steel prices are still at a relatively low level, pointing to a potential rise in 2017, says an industry expert.
"This year, steel supplies in China may shrink but demand will remain stable," predicts Wang Jianhua, chief analyst at Shanghai Ganglian E-Commerce Holdings.
"The average price of iron ore will stay at around USD70, unless a major 'black swan' event occurs. If production restrictions continue in the coal market, coking coal and coke prices may rise by another 50 percent. So, there is room for a 15 percent, or even bigger increase in the average steel price in the full year," Wang said.
"If steel prices go on an uptrend in 2017, the steel market will experience high volatility and several roller coaster rides may be expected," said Chen Kexin, chief analyst at LGMI.
"In 2017, steelmakers will have better fundamentals than iron ore producers and the reform may bring excess profits to steel companies." said Wu Xing, Kaifeng Investment's Chairman.