On July 3, China's National Development and Reform Commission (NDRC) issued its latest survey results regarding the main steel wholesale markets nationwide, which show market players’ weak expectations for the steel market in July.
The survey, measuring expectations based on six key indices, found that the Sales Price Expectation Index and Purchase Price Expectation Index for the wholesale market stood at 37.3 percent and 44.4 percent for July, respectively, indicating significant decreases of 24.1 and 16.7 percentage points from the previous month, both falling below 50 percent. So, steel prices are expected to decline in July despite the rises seen early in the month, according to the NDRC.
The Sales Volume Expectation Index and Inventory Expectation Index for July stood at 48.1 percent and 57.6 percent, respectively, down 2.4 percentage points and up 5.2 percentage points from the previous month. This signals an expected decrease in demand and higher stocks.
The NDRC warned market participants of potential risks affecting demand for steel from downstream users in July, for instance, high temperatures, floods, and frequent tropical storms in South China, which will exert a negative impact on construction activities.
The Sales Cost Expectation Index and Sales Profit Margin Expectation Index for July were at 47.2 percent and 46.2 percent, respectively, seeing a decrease of 12.3 percentage points and a slight increase of 0.5 percentage points from the previous month, respectively. This means that, despite lower anticipated costs, profit margins for steel sales are unlikely to improve due to the expected weakness of demand.
Moreover, steelmakers’ enthusiasm for production may not fade even though there were some slight declines in early July, while the support from the cost side will likely weaken, which would negatively affect steel prices in July, the NDRC forecasts.