According to the latest data from the China Steel Association, the average daily crude steel output in August for the second half of the month is estimated at 2.192 million tons, representing a slight increase of 0.05% 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's expected that the overall average daily crude steel output for August will reach 2,216,800 tons, marking a modest rise of 1.04% (or 0.7%) from the previous month's actual figure.
The recent rebound in domestic steel prices during July and August helped key steel enterprises turn losses into profits in July. This, combined with expectations of the traditional “Golden September and Silver October†peak season, has boosted companies’ enthusiasm for expansion. Despite the weak consolidation in the domestic steel market since late August, and the fact that iron ore prices have risen significantly more than steel prices—eroding corporate profits—steel producers have not reduced output, which has raised concerns among market participants. According to MySteel Network, the utilization rate of 156 blast furnaces in Tangshan remained between 93% and 94% in August, up from 90% in July.
Although the steel market has entered the traditional peak season, the trend of weak consolidation continues. While the Producer Price Index (PPI) fell by 1.6% year-on-year in August, the decline has narrowed for three consecutive months, signaling that the industrial economy is gradually stabilizing. Meanwhile, social steel inventories have fallen for the 25th consecutive week, indicating some level of demand in the market. However, with terminal demand still weak and steel supply pressures rising again, the market may remain stagnant until steel mills adjust their ex-factory prices.
As of September 6, 2013, the national social steel stocks in major cities stood at 14.49 million tons, down 1.4% from the previous week and 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% from the same period last year. However, it remains at a low level since February.
Tomorrow, the National Bureau of Statistics will release macroeconomic data including fixed asset investment, real estate development investment, and total retail sales of consumer goods for August. Additionally, new ex-factory price announcements from major domestic steel mills are expected to follow, potentially breaking the current consolidation pattern and causing market volatility. However, the continued rise in crude steel production may limit the upward potential of the steel market in the coming period. Historical data shows that after reaching high levels in the second quarter, domestic crude steel output typically declines in the third and fourth quarters. Given the weak demand in the fourth quarter, steel production in September may not surge sharply, but a significant drop is also unlikely.
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