May 20, 2020
Tsingshan's stainless steel order book fills as China rebounds, traders load up
2020-05-20
SINGAPORE/BEIJING (Reuters) - Tsingshan Holding Group, the world’s biggest stainless steel producer, has sold the entire output of its Chinese plants through June, said two sources familiar with its sales, a sign of potentially strong domestic demand for the metal
The full order book indicates some recovery in Chinese consumption as the world’s second-biggest economy reboots after extensive lockdowns to halt the spread of the new coronavirus earlier this year. Stimulus measures unveiled by Beijing to revive the economy are expect to boost steel use as the country gets back to work.
Still, about half of Tsingshan’s current orders have come from traders rather than end-users, said one of the sources, versus the typical 85% of orders from end-users, indicating that some of the demand is insecure and raising some doubts about its longevity.
“May and June are full,” said the source, adding that the company had also already sold about two-thirds of its July output in China. “Recently the sentiment is really good and people try to buy.”
Tsingshan did not respond to an emailed request for comment.
Car makers, machinery manufacturers and construction firms are driving Chinese demand for stainless steel, a corrosion-resistant alloy that also includes chromium and nickel.
Optimism that new infrastructure projects such as train stations, airport expansions and 5G cell towers will be built under new stimulus plans is also bolstering demand.
Cumulative buying across those user bases has pushed Shanghai stainless steel futures SHSScv1 up 12% so far this quarter, with the most-traded contract rising to 13,730 yuan ($1,930.62) a tonne last week, the most since Jan. 23.
“China’s stainless steel market is much better than expected,” said Wang Lixin, a manager at consultancy ZLJSTEEL. “After March, Chinese businesses rushed to make up for the previous orders,” she said, referring to a backlog of orders that accumulated when the economy was closed down.
Source: Reuters
