Chinese steel price levels seem to have overcome the hiccup of hike in interest rates early last week by 25 basis points. With the summer warming up the demand shear has finally prevailed over the impediments
The Chinese steel market has put up brave front. Although the grapevine is agog with news of another round of hike in interest rate just after Labour Day festivities prices have shown steady progress during this week.
The runaway inflation at 5.4% in CPI during March 2011 has raised eyebrows in the mandarins of government raising chances of 5th hike in interest rates. Such a move has inhibiting impact on the purchasing power of the buyers and sellers since their propensity is function of the liquidity.
The immediate factors fuelling price buoyancy can be as follows:
1. High input material prices viz., iron ore, coke and scrap
2. Gradual stock depletion especially of rebar and HRC for the 7th and 6th consecutive week respectively.
3. Anticipated cut in production after Labour Day holidays owing to electricity cut triggered by shortage of coal.
The apprehension of hike in Reserve Ratio had a definite impact on the steel futures. Despite the current round of hike in prices it is not expected to sustain for long if not supported by a growth in housing projects. With the recurrent hikes severely curtailing the liquidity transactions in the reality sector will be sparse impeding sustainable improvement.
The stock depletion as the consumption picks up with mills maintaining high price as the raw material prices remain adamant kept the sentiments afloat.
At the same time with May Day holiday on the anvil restocking has picked up with fuelled by rumored hike in interest rates
The Chinese Long Product Price Index CLPPI has gone up by 88 points last week whereas the Chinese Flat Products Index CFPPI surged by 55 points. The overall price index CHISPI inclined by 69 points.
( source: www.steelguru.com )