The rise
in China’s steel exports is a negative indicator, as it indicates rising
production amid lower demand. (AP)
A pick up in demand in China can help lift global metals demand and
prices
NEW DELHI : Easing
covid-19 restrictions in China may lead to an increase in demand and prices of
metals, but the uptick maybe limited, said industry experts.
As the largest consumer of
commodities, a pick-up in demand in China can help lift global metals demand
and prices amid recessionary concerns in developed economies such as the US and
Europe. Rising demand and prices in China will also be key to prevent cheap
imports to India and help improve domestic steel prices. However, analysts said
that while easing of covid restrictions in China can accrue positives, benefits
may be gradual. Domestic steel prices are still near import parity prices, and
under pressure. Declining coal prices, however, can accrue benefits on the
margins.
Encouraging Chinese trade data for
November, expectations of easing covid restrictions and stimulus measures from
Beijing led to a rise in copper and aluminium imports by China, said analysts.
Nevertheless, this could have been aided by lower functional capacities as
aluminium prices had seen significant corrections.
However, the rise in China’s steel
exports is a negative indicator, as it indicates rising production amid lower
demand. It also increases the threat of higher steel imports to India.
“Pick-up in steel exports (China),
despite declining global prices, is a cause of concern, particularly when
traditionally weak demand period for construction looms large and winter
production cuts in Tangshan are not as stringent as last year," analysts
at ICICI Securities said. That said, lower aluminium exports owing to domestic
production cuts is expected to maintain the market balance and support the
London Metal Exchange, they added.
For Indian steel producers, steel
prices in the domestic market have continued to decline. During the week ended
9 December, domestic hot-rolled coil (HRC) prices fell by ₹1,500 a tonne
week-on-week to ₹54,100, the lowest since March 2021,
said a Nomura Research report on 12 December. With this, the difference between
domestic steel prices over import prices is falling, but domestic prices are
still at a ₹1,700 per tonne premium to import
prices from China, showed Nomura data.