Interfax-China reported that domestic spot steel product prices are expected to further decrease by between CNY 200 per tonne and CNY 300 per tonne on average in September, which Chinese industry analysts told Interfax on August 25th is a correction to a previous surge.
During the past two weeks, domestic spot steel product prices have witnessed a free fall of more than CNY 1000 per tonne.
Mr Xu Xiangchun an industry analyst with Mysteel Information said "I believe that prices have now returned to a reasonable range, and will dip slightly in September driven by panic selling or attempts to reduce high stockpiles. However, prices will receive technical support at the low levels seen in April."
As for several major steel mills raising September EXW steel product prices. Industry analyst Mr Hu Yanping from Umetal said that the move is aimed at bolstering market confidence to prevent a faster fall in spot prices. However, Mr Xu said that steel mills will eventually have to lower their ex-works prices, as market prices between traders and downstream users have already fallen below that of steel mills.
Mr Xu said "The spot domestic price of hot rolled steel coil increased from lows of around CNY 3,200 per tonne in April to a high of CNY 4,450 per tonne in mid August. The prices surged rapidly in a short period of time, between late July and early August, by almost CNY 600 per tonne on the back of significant ex-works price hikes by steel mills."
Mr Xu said that traditionally, the country''s steel product output is supposed to be lower in the July to August period, as demand is usually weak during summer. He added that this year''s price surge was abnormal, and has increased the risk of price corrections.
He also said some small sized steel mills have already started production cuts in response to the sluggish market and more are preparing to scale back production as well.
Strengthening prices prompted steel mills to ramp up output to a high level, and traders to stockpile products in late July and early August in anticipation of continued price increases. China''s crude steel output peaked in July, reaching 50.68 million tonnes which rose by 2.61% from the previous month, and 12.6% on an annual basis. Based on July''s output, the country crude steel production for the year would hit 608 million tonnes.