Decreasing profit margins of Chinese steel mills forcing them to raise steel product prices in February 2023. The rising cost of raw materials and lowering inventories provide strong sentiments to increase the prices. In January 2023, prices of Chinese steel increased by 50- 200 yuan per ton, and it is expected that in February may rise by 50-150 yuan/t.

Iron ore productivity decreased in China by 1% on Y/Y and a decrease of 1.2% in December 2022 on m/m, and prices are recorded at $127.5/t compared to $80/t in November 2022. Iron ore prices will remain high due to an optimistic market.

According to a survey, 32.5% of mills out of 247 are enjoying profits, and the rest are facing losses. Inventory levels are raised by 3.3 million tons during the Chinese New Year Holidays (21-27 January) compared to 4.8 million tons in 2022 and 7.5 million tons in The little increase in inventory data provides strong sentiments to boost domestic steel prices during the last seven years.

The rise in steel prices is an incentive for the steel makers and traders to increase their stocks; however, the construction sector has less demand for steel which may, in the future, cause a decline in prices.

Fitch predicted last year iron ore prices would decline to $85 in 2023 and $75 in 2024. The situation will be more apparent when China works with its total capacity.