With production increasing after the Lunar New Year holiday, Chinese mills are facing soaring steel prices, with some key commodities such as rebar up 6.62% from the last trading day of lunar 2020. 

1. Higher iron ore prices, higher steel prices 

Experts say that China’s continuous resumption of jobs could cause steel prices to rise above record this year, opening the country’s 14th Five-Year Plan (2021-25).

Domestic iron ore futures prices peaked at 1,180 yuan ($ 182) a ton on Monday, with prices of coking coal, scrap steel, and other raw materials also rising, according to Beijing Lange Steel Information Research Center. Although iron ore fell 2.94% on Tuesday to 1,107 yuan/ton, it is still above average.

China is a major buyer of raw materials, and its post-pandemic economic recovery stands out more than other countries. According to experts, that leads to the return of foreign trade orders to China and thus the demand for steel to soar, and this trend is likely to continue.

2. Steel demand also boost steel prices to reach above last year high records

Ge Xin, the senior analyst at Beijing Lange Steel Information Research Center, said iron ore is trading at an average of 150-160 USD / ton and is likely to rise above 193 USD this year, possibly even to 200USD if demand continues to increase strongly.

Experts say that the start of the 14th Five-Year Plan will further boost the overall economy, so steel demand will also increase.

Post-holiday steel shipments start this year earlier than the previous year, according to industry sources, and both volumes and prices are higher.

According to the industry research team, due to the rapid increase in steel prices, some steel traders do not want to sell or even limit selling at the current period, with the expectation that prices can rise further by the end of the year.

However, some also argue that China’s market performance has only a limited role in pushing up steel prices, due to its weak bargaining power in the international arena.

“Iron ore is the exclusive product of four major mining companies – Vale, Rio Tinto, BHP Billiton, and Fortescue Metals Group – that accounts for 80% of the global market. Last year, China’s reliance on foreign iron ore.” has reached more than 80%, which means that China is in a weak bargaining position.

Source: satthep.net