Markets have been highly anticipating steel demand recovery and more economic stimulus in the coming months, driving China's steel prices up since mid-March. However, the latest wave of COVID-19 infections in the country poses more challenges to domestic steel demand than steel production.
China's steel production is expected to rise in April, but supply chain disruptions and logistics hurdles across may parts of the country could continue to undermine end-user steel demand.
Here are six things to watch in China's steel sector at a time when the market remains over-optimistic about demand recovery.
The resurgence of COVID-19 infections in China that started around mid-March and spread across several provinces has not weighed on the country's steel production prospects in April.
China Iron & Steel Association estimated China's daily crude steel output in March 21-31 to have increased by 4.9% from mid-March to 2.788 million mt/day. Daily crude steel output in March increased to 2.709 million mt, up 1.2% from the average level in January-February despite Tangshan's city-wide lockdown since March 19.
Market sources said the uptrend in China's steel production will continue in April, especially as Tangshan, China's steelmaking hub, gradually eased city-wide lockdown since March 28. Tangshan fully lifted social restrictions on April 11, and its steel production is now expected to resume an upward trend, adding extra momentum to China's steel output growth.
"If it were not for the COVID outbreaks, China's crude steel output in early April should have already reached the level [3.26 million mt/day] of a year ago," one source said, adding the uptrend in China's steel output could accelerate in the coming months.
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