The daily average output of crude steel in China remained high in late March, according to the latest data from the China Steel Association. The estimated daily production was 2.0719 million tons, marking a 0.4% increase compared to the previous month. While slightly below the historically high level of 2.0846 million tons recorded in early March, it still reflects a strong performance in steel production.
Despite Hebei Province's implementation of new environmental protection policies at the end of March, the impact on steel output appears limited. On one hand, downstream demand is gradually recovering, and steel companies are reluctant to cut production significantly. On the other hand, only when the steel industry continues to face losses will mills be forced to reduce output. Currently, domestic steel companies are operating at the margin of profitability, which suggests that further increases in crude steel output are unlikely.
In March, China’s manufacturing PMI stood at 50.9%, continuing its expansion for six consecutive months. However, the finished goods inventory index shifted from contraction to expansion, signaling a potential slowdown in demand. Meanwhile, industrial producer prices fell by 1.9% year-on-year in March, with the rate of decline accelerating. These trends indicate weak demand for industrial products, particularly as steel demand fell short of expectations, leading to rising inventories. By the end of March, the inventory of key steel enterprises reached 137.56 million tons, an increase of 1.0559 million tons from the end of February.
Additionally, raw material prices such as iron ore and coke remain low, and their influence on steel prices is weakening. As of April 8, the import price of iron ore was 976.4 yuan per ton, down 7.74% from the same period last month. The comprehensive transaction price of steel was 3,924.9 yuan per ton, a 2.41% decrease compared to the same period last month. Iron ore port stocks also continued to grow, with 67.96 million tons stored across 30 major ports—a slight increase of 40,000 tons from the previous week.
However, in April, despite ongoing supply pressure, domestic steel inventories have been declining, suggesting a gradual release of downstream demand. According to mysteel.com data, as of April 5, the social inventory of five major steel products in major cities nationwide dropped to 21.6256 million tons, a 1.42% decrease from the previous week, marking the third consecutive week of decline. At the same time, the CPI rose 2.1% year-on-year in March, but inflationary pressures are not expected to rise sharply. The central bank is unlikely to tighten monetary policy significantly, and liquidity in the interbank market remains ample.
Overall, while demand in the steel market is showing signs of improvement, supply pressure has not eased. In the short term, steel prices are likely to remain in a consolidation phase, with limited room for a significant rebound.
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