According to a new report issued by the China Iron and Steel Association (CISA), demand for steel in China in April has been very good, strongly bolstering steel prices.

Moreover, steel prices surged at a higher speed following the Labor Day holiday due to decent demand and high levels of raw material prices. Reaching their peak in mid-May, they indicated sharp declines amid the central government’s measures to curb rapid rises in commodity prices. There are a number of factors that participants in the Chinese finished steel market should pay attention to in May, the CISA stated.

First of all, inventory levels of finished steel have decreased. As of May 20, the finished steel inventories of large and medium-sized steel enterprises in China amounted to 14.6395 million mt, decreasing by 44,300 mt or 0.3 percent compared to May 10.

Secondly, according to the National Bureau of Statistics (NBS), China’s crude steel and finished steel outputs reached 97.85 million mt and 121.28 million mt in April, up 13.4 percent and 12.5 percent year on year, respectively, while the average daily crude steel output of all steelmakers in China amounted to 3.262 million mt in April, up 7.5 percent compared to March this year.

Thirdly, the China Iron Ore Price Index (CIOPI) stood at $186.9/mt as of April 30, increasing by 14.34 percent month on month, while up 83.01 percent year on year. The CIOPI stood at $211.05/mt as of May 19, up 32.29 percent compared to the beginning of the current year. The rapid rises in iron ore prices pushed up finished steel prices.

As of May 1 this year, the tax rebate has been cancelled for steel products, which should limit the export of primary steel products and ordinary steel, but, following the sharp local price drops in China, exporters have managed to stay competitive in the export market, especially in the flat steel segment.

Amid the measures to curb commodity prices in China, it is thought that China’s steel prices will stabilize later in May after recording downward corrections.