NDRC: Steel prices continue to rebound, with inventories lower than last year.

On Tuesday morning, October 25, 2016, the National Development and Reform Commission held a press conference to brief the public on progress in capacity‑reduction efforts. Xu Kunlin, Deputy Secretary-General of the NDRC, stated that since the beginning of this year, the steel industry has exhibited three key characteristics:

1. Prices have continued to rebound. According to monitoring by the China Iron and Steel Association, steel prices have generally trended upward since the beginning of the year. In April, the composite steel price index reached a peak of 84.66 points; after a pullback to 69.97 points in June, it resumed a gradual recovery. Since August, steel prices have remained stable, with the composite index hovering around 75 points. As of October 21, the composite steel price index stood at 79.00 points, up 19.17 points year-on-year and 22.63 points from the start of the year. Prices for key steel products—including high‑carbon wire rod, Grade III rebar, and hot‑rolled coil—rose by 27.4%, 27.9%, and 44.9%, respectively, compared with the same period last year.

2. Overall steel inventories remain below the level of the same period last year. According to data from the China Iron and Steel Association, as of the end of September, total steel inventories in major domestic markets stood at 9.41 million tonnes, down 8.3% year on year; however, this represents a 790,000‑tonne increase compared with the beginning of the year, or a 9.2% rise. With the onset of colder weather, the steel market is gradually entering the traditionally slow fourth‑quarter demand season, and social inventories are expected to climb further. Nevertheless, the overall inventory level remains lower than last year’s.

3. The temporary, rapid rise in raw material prices has adversely affected the industry’s current profitability. According to data from the China Iron and Steel Association, as of October 14, the prices of coking coal and metallurgical coke had increased by RMB 507 per ton and RMB 849 per ton, respectively, compared with the beginning of the year—up 81.4% and 126.2%, respectively—while steel prices rose by only 36.1% over the same period. The sharp escalation in the costs of coking coal and other raw materials is expected to significantly erode steelmakers’ profits.