Singapore — China's domestic passenger car market showed further signs of improvement in October, providing decent demand for cold-rolled coil as car makers restocked. But the outlook for the rest of this year remains fairly muted, according to market sources.
China's passenger car retail sales in October were down 3% on the year after rallying late in the month, according to the China Passenger Car Association. Though still down on the previous year, October sales were better than the 6.5% fall in September and a near 10% drop in August.
The association believed the passenger car market had gradually stabilized.
One mill source said cold-rolled auto sheet orders received at his company in October had increased by 10% from September, and were back to a similar level as a year earlier. He said this was mainly because car producers needed to speed up production of vehicles that met phase six emission standards, after clearing inventories of phase five-standard cars over the past few months.
As a result of improved demand from the car manufacturing sector, the spread between CRC and hot-rolled coil has increased from Yuan 238/mt ($34/mt) in late May to Yuan 683/mt as of early November, S&P Global Platts data shows. This indicates that Chinese domestic CRC sales are once again profitable, as the cost of turning HRC into CRC is Yuan 400-500/mt.
However, the mill source said car producers remained cautious and preferred to keep their steel inventories at 1.5-2 months, down from 3-4 months last year.
He said steel demand from car producers was unlikely to improve further in coming months, as they had almost completed near-term restocking amid a generally sluggish auto sector.
-- Analyst Jing Zhang, email@example.com
-- Edited by Geetha Narayanasamy, firstname.lastname@example.org