As China ambles to week long National Holiday (1st -8th October) the steel market heave a sigh of relief after a sordid September. Market would vie to erase the memory of the havoc underwent as prices plummeted at the bristling pace.
Triggered by the crisis in US and Europe, the two major trading partners, the market succumbed to the overbearing economic compulsions despite strong fundamentals at the culmination of monsoon.
Run up to the collapse was marked by an extended and uneasy solitude wherein demand from construction and consumer durable segments was rearing to go, but was critically balanced by equally damning global economic developments creating uncertainty and circumspection.
Devastation wreaked by collapse is reflected in the third consecutive monthly fall in PMI at 49.4 in August (figure below 50 means contraction in industrial growth). At the same time double digit lending rate (10%) is barely enticing for business to pick up.
Product profitability of steel mills has been eroded with rebar profits below CNY 100 per tonne and HRC has been squeezed to CNY 40 per tonne to CNY 50 per tonne.
Holiday will be utilized for introspection and possible alignment of demand supply mismatch to give fillip to the sagging sentiments post holiday.
The Chinese Long Product Price Index CLPPI has gone down by 172 points last week whereas the Chinese Flat Products Index CFPPI has also declined by 105 points. The overall price index CHISPI declined by 134 points.
( Source: www.steelguru.com )