According to the latest data from the China Steel Association, the average daily crude steel output in China during the second half of August reached 2.192 million tons, marking a slight 0.05% increase compared to the previous month. The average daily output in the upper, middle, and lower thirds of August all exceeded 2.11 million tons. It is projected that the overall daily crude steel output for August will be approximately 2.2168 million tons, representing a modest 1.04% rise (or 0.7% year-on-year) from the previous month's estimated value.
The recent rebound in domestic steel prices during July and August helped key steel enterprises turn losses into profits in July. Additionally, expectations of the traditional "Golden September and Silver October" peak season have boosted companies' confidence and willingness to expand production. Despite the weak consolidation in the domestic steel market since late August, and the fact that iron ore prices have risen more sharply than steel prices—thereby squeezing corporate margins—steel producers have not shown any intention to cut output, which has raised concerns among market participants. According to a survey by MySteel Network, the utilization rate of 156 blast furnaces in Tangshan remained at 93-94% in August, up from 90% in July.
Although the steel market has entered the traditional peak season, the trend of weak consolidation continues. In August, the Producer Price Index (PPI) fell by 1.6% year-on-year, but this decline marked the third consecutive month of narrowing drops, suggesting that the industrial economy is gradually stabilizing. Meanwhile, social steel inventories have been falling for 25 straight weeks, indicating some underlying demand in the market. However, with terminal demand still sluggish and supply pressures rising again, the steel market may remain in a holding pattern until mills adjust their ex-factory prices.
As of September 6, 2013, the national social steel stock in major cities stood at 14.49 million tons, down 1.4% from the previous week, continuing the 25-week downward trend. At the same time, the inventory of key steel enterprises reached 12.45 million tons at the end of August, increasing by 0.81% from the end of the previous month and 5.05% compared to the same period last year. Still, it remains at a low level since February.
Tomorrow, the National Bureau of Statistics will release key macroeconomic data, including fixed asset investment, real estate development investment, and total retail sales of consumer goods for August. In addition, the new round of ex-factory price adjustments from major domestic steel mills are expected to be announced one after another, potentially breaking the current consolidation and causing market volatility. However, the continued rise in crude steel output could limit the upward potential of the steel market in the coming months. Historical data shows that after reaching high levels in the second quarter, domestic crude steel production typically declines in the third and fourth quarters. Given the weak demand in the fourth quarter, it's unlikely that steel output will surge in September, though a sharp drop also seems improbable.
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