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Steel could shine in 2017 as China expands capacity controls - Citigroup-The 18th China(Guangzhou)Int’l Metal&
nbsp;&Metallurgy Exhibition
12/27/2016 steel expo-metal &metallurgy expo |
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Bloomberg reported that Citigroup Inc China has handed the resurgent global steel industry an early boost for next year, with a clampdown on illegal mills that could benefit the world’s biggest producers. Bank analysts including Jack Shang and Tracy Liao wrote in a note that a campaign by China to shutter some induction furnaces may hit as much as 5% of the country’s output thus raising prices for Chinese steel and is poised to prop up iron ore and coking coal markets when blast furnaces ramp up to fill the gap.
According to the note, “China is the largest exporter of steel in the world and Chinese export prices effectively put the floor under the global steel prices in our view. The crackdown is changing the investment case for global steel stocks, iron ore and coking coal.”
The closures in four provinces show China is using an expanding toolbox of policies to restructure the world’s biggest steel industry after decades of growth.
Stricter environmental rules, and this direct action against illegal small producers, add to measures to cut capacity. At the same time, moves to stimulate growth in Asia’s biggest economy have benefited global steelmakers, with China’s exports poised to fall in 2016 for the first time in seven years.
Citigroup said that steel in Europe and the US could rise USD 50 to USD 80 a tonne in the next month if Chinese prices hold at current levels. The price of benchmark hot rolled coil shipped from China has already jumped to USD 530, the highest since 2013, according to Beijing Antaike Information Development Co.
Industry data for November shed an early light on how tighter restraints might play out next year, especially if this year’s resurgent demand is sustained. Run-rates at China’s steelmakers didn’t budge in November from October, even though prices were surging on a fresh bout of optimism for demand.
-The
18th China(Guangzhou)Int’l Metal &Metallurgy Exhibition
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