China's steel market is likely to continue to run below expectation in May, with limited signs of improvement in demand by the downstream users, according to a steel wholesale market survey conducted by the price center of the National Development and Reform Commission.
The indexes of expected selling and buying prices of the wholesale market stood at 32.2 and 33.5 respectively in May, down by 33.6 and 32.9 respectively from the preceding month and all falling below the 50-mark level, which separates expansion and contraction.
The expected sales volume and inventory indexes in May came in at 44.9 and 35.1, also down by 28.7 and 18.1 respectively from the previous month, suggesting steel product sales may continue to move downward and all parties still adopt a low-inventory strategy.
The cost and profit indexes were 33.2 and 44.9 in May, down by 23.1 and 18.1 from April. The costs of raw materials are expected to reduce, but as demand would remain weak, the profit in May is forecast to contract, according to NDRC.
The main reasons for the continuous weakening of steel prices in April were the high supply, lower-than-expected demand and weakening cost support.
Panic sentiment continues to grow in May with still weak improvement in downstream demand, resulting in a general prudence among participants.
The overall steel market in May is likely to stay volatile and weak. Deepening losses forced some mills to arrange maintenance to their blast furnaces, which may provide moderate support to steel prices due to decline in supply. However, the continued slow recovery of the real estate market, a major steel-consuming sector in China before the outbreak of developers' debt crisis, would give limited support to the demand during the month.
(Writing by Emma Yang Editing by Harry Huo)
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