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China's CRC steel demand to remain subdued in H2 on weak car sales forecast: traders

  • Author
  • Analyst Jing Zhang
  • Editor
  • Wendy Wells
  • Commodity
  • Metals

Singapore — China's passenger vehicle market will remain challenging in the second half of 2020, despite showing some signs of improvement from H1, a key industry association forecast this week, which steel market sources said meant demand for cold rolled coil was unlikely to see any substantial increase before year end.

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Passenger car retail sales are forecast to fall 11% year on year in 2020, despite sales in H2 improving after a 22.5% year-on-year decline in H1, the China Passenger Car Association forecast on July 21. This decline would follow a 7.4% year-on-year fall in domestic car sales in 2019, CPCA data showed.

The association said that while the worst of the COVID-19 demand destruction was over for the passenger car market, downward pressure still lay ahead due to decreased household incomes and the risk of a pandemic resurgence at home and abroad.

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CPCA expected China's car retail sales in July to edge higher on a year-on-year basis but be lower than in June as sales promotions by local governments and car retailers gradually came to an end.

Steel traders said that while infrastructure-related China's domestic manufacturing sector continued to recover in July, benefiting HRC and plate, there was little sign of improvement in CRC demand from car makers.

As a result, the spread between the domestic prices of CRC and HRC in the Shanghai spot market narrowed to Yuan 365/mt mid-week from Yuan 390/mt ($56/mt) in late June, S&P Global Platts data showed.