December 02, 2008

Construction steel output in China in Q3 to remain subdued

It is reported that in H1 2008, construction steel production which so far has followed an upward course, would be constrained and the output could go to stabilize or even slip in the third quarter of 2008 due to following reasons.

1. Construction steel producers are cutting output. Take North China and East China as examples, Hebei has responded to the national call and closed a list of heavy polluting enterprises for ensuring good air quality for the Olympics and some big mills in East China also declared plans of cutting Jul production.

2. The construction steel price has been correcting and the cost pressure is found difficult to pass on to the end users. Further, the construction projects will be delayed in the hot summer days demand and transaction are thus weakened and feel feeble to support the prices. Also given spiking fuel and materials cost, many re-rollers would take cutting output as a mean of stabilizing the market.

3. Steelmakers and traders are faced with financial pressure amid the tight monetary policy. Experiencing the snow storm and big earthquake didn't change the curbing policy of the government in order to control over-fast growing economy. Under such circumstances, steelmakers, traders and end users are all in face of increased financial stress. And the nation's aim of preventing fixed asset investment from speedy growth would also impact the construction steel market.

As per report, to sum up the construction steel producers would be attacked by lofty production cost and shrinking market transaction, also probably, higher inventory and heavier financial stresses while entering into the third quarter. Cutting output will be an effective method to deal with such situation, but due to joint reduction in North China for welcoming the Olympics, construction steel capacity in China would be curbed and the output may decline then.

(Sourced from MySteel.net)