21 August 2020
- We remained of the view that overall steel supply conditions are marginally bearish on Steel prices. Improving blast furnace utilization rates remains in place which would keep over hot metal production elevated. However, this would also mean that overall spare steel capacity continues to tighten, which would be supportive of steel prices. Finished steel product growth continue to increase and this would imply that the recent strong product drawdown is facing increasing difficulty in pushing the incremental supply further downstream.
- We remain bearish on short-term steel demand. While incremental spot steel demand growth remains positive, we note that there some signs of further slowdown which would add further downward pressure to prices if it materializes. Our forward (weeks 35-36) demand indicator too point to further weakness. While the slowdown is not serious, it is nonetheless suggesting some ceiling to prices in the short-term. China’s overall property inventory index continues to be on an upward trend which should drag on prices in the short-term.
- We remain bullish in our assessment in the effect of short-term macroeconomic conditions on steel prices. Short-term lending conditions deteriorated which is not a welcome news for short-medium term steel demand. While our FX model remains supportive of overall prices, there some signs of weakness which would add some downward pressure if it continues. The latest manufacturing data were largely encouraging which would suggest further support for prices,