Prices for longs and structural are steadily falling in the Chinese domestic market. Despite reduced traders' stocks, buying is restrained by a strict governmental policy. Moreover, a seasonal decline in end-users' demand is expected in the northern provinces of the country by next month, so distributors will be signing deals even more reluctantly. Under these conditions, even a lift in import iron ore quotations could not prevent a drop in mills' prices for longs.
In particular, Shandong Group and Nanjing Iron & Steel have cut their rebar offers by $20/t (RMB 130/t) w-o-w. The latter has also reduced wire rod quotations by $24/t (RMB 150/t). In turn, Shagang Group has once again decreased longs prices by $24-35/t (RMB 150-220/t) after a $19-20/t (RMB 120-130/t) fall in end-October. Yonggang Group has cut its offers of rebar and wire rod even more significantly – down by $38/t (RMB 240/t) and $63/t (RMB 400/t) respectively. Prices for structurals have decreased less notably: Rizhao Steel's quotations have slid by $8/t (RMB 50/t) w-o-w, however, offers of structurals lost $31/t (RMB 200/t) a week before, as previously reported. The largest Chinese manufacturer of longs, Hebei Iron & Steel, pursues the similar policy. It slashed domestic longs quotations by $47-63/t (RMB 300-400/t) in end-October, but has not revised them this week.
However, there is a reason for optimism: stockists' prices for longs have ceased falling added $10-15/t w-o-w on firmer end-users' demand and higher prices for semis ($5-10/t up) and raw materials. A gap between mills' and stockists' quotations has shrunk from $10/t to $3/t on average, because the suppliers are pursuing different price policies. However, mills' prices are still higher. Normally, traders' prices for longs are at least $10/t above mills' prices, that is why market players still believe the manufacturers may continue cutting their quotations.
Market outlook is still gloomy, despite some signs of improvement in the stockists' market. A number of railroad construction projects have been suspended in China, which, apart from a seasonal decline expected in construction companies' demand, will hamper recovery of business activity until the end of 2011. Suppliers also fear that iron ore quotations will continue falling.
Nevertheless, the Chinese still believe that domestic demand will rally in the long run. The Chinese government informs that railroad projects have been just postponed for some time. Besides, it is ready to invest around $31.4 billion (RMB 200 billion) in them. Among other projects, reconstruction of Gaoqi airport in Xiamen, Fujian province, is worth mentioning (project cost is around $651 million or RMB 4.17 billion). The works will be completed before 2015, according to the schedule.
( Source: www.metalexpert.group.com )