Chinese steel prices unlikely to recover in July amid high output, Cisa says

China’s steel demand could continue to increase with steady economic growth, but prices are unlikely to recover in the short term amid an oversupply, the China Iron & Steel Assn (Cisa) said.

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The country’s GDP grew 7.5% in the second quarter of 2014, higher than the 7.4% growth in the first three months of the year, which signals a firming of its macro-economy. Beijing is expected to continue with its mini-stimulus in the second half of this year to ensure steady growth, which could also help drive demand for steel, Cisa said forecast in a monthly report published on its website on Thursday July 17.

On Wednesday July 16, China’s Premier Li Keqiang urged local authorities at all administrative levels to ensure that the central government’s reform policies are implemented to support economic growth. The government has set its sights on a GDP growth of 7.5% for this year.

However, this may not translate to a recovery in steel prices, as the oversupply problem will not likely be eased in the short term with output continuing to rise, Cisa pointed out.

China produced an average of 2.31 million tpd of crude steel in June, a new record high, according to data released by the National Bureau of Statistics on July 16.

Daily crude steel output at Cisa member mills, which are mainly medium-sized and large steelmakers, also rose in early July on improved profitability, Cisa data published on the same day showed.