Abating Chinese demand to weigh on steel prices, says Macquarie

BEIJING (Scrap Monster): The persistent weakness in Chinese steel demand is likely to play a prominent role in steel prices, notes the latest research report published by Macquarie- the global investment banking and financial services group. The steel demand from construction sector has witnessed considerable slow down. This will add pressure to the entire supply chain. The weakening demand situation may force many Chinese mills to cut production in coming months.

According to Macquarie’s steel survey, the construction orders continue to fall in China. Meanwhile, infrastructure demand had turned negative. Traders are seen attempting to reduce their inventory levels. As a result, mills are seeing reduced orders. This in turn may lead to increased production cuts during the month of October, Macquarie notes.

The latest statistics published by the China Iron and Steel Association (CISA) indicates that the apparent crude steel consumption by the country during the month of August this year fell nearly 2% over the previous year to 61.9 million tonnes. The country’s steel consumption during the initial eight months of the current year has dropped by 0.3% to 500 million tonnes. This is in comparison with the steel consumption during the corresponding eight-month period in 2013.

The research report states that demand concerns will now come into prominence, as both traders and mills witness sharp cut in steel orders.