It is reported that in mid April prices increase in Chinese steel market stopped. The prices for rebar and HRC which are the most demanded products in long and flat steel sectors correspondingly, decreased at about USD 5 per tonne to USD 10 per tonne. There were no expectations of the fall. However, the domestic prices in China are getting significantly behind the global market level, where the steel manufacturers are increasing their products’ prices in order to cover raw materials costs.
First of all this regards HRC, which were offered last week in Chinese market averagely at CNY 4550 per tonne from the stock. To compare in Eastern Asia, in Europe and in Middle East similar products’ prices reached USD 740 per tonne to USD 800 per ton CFR. The growing difference in the prices contribute to Chinese export volumes increasing. In March Chinese companies exported more than 960,000 tonne of HRC. It was a little less than 30% of the supplies. Totally in the Q1 2010 HR steel export was more than twice as high as in the same period of 2009.
In mid April Chinese products were offered at about USD 730 per tonne to USD 740 per tonne CFR in Korea and South East Asia, at USD 740 per tonne to USD 750 per tonne CFR in India, and at USD 760 per ton CFR in the Gulf countries. Some companies offered HR steel to Europe as well at nî USD 730 per tonne to USD 760 per ton CFR, but these conditions did not satisfied European buyers due to long delivery terms.
Chinese specialists name several reasons for the national steel market weakening. First of all, the demand which boosted in March returned to the normal in recent weeks. If earlier some companies refilled the stockpiles, than today the purchases volumes reflect real consumption level, which is rather high, but does not exceed the suppliers’ capacities. In March the peak 55.0 million tonnes of steel were produced. April volume obviously will be much worse. The problem of steel overproduction in the country got less acute, but it has not disappeared.
The government actions on the chilling of the overheated real estate market” sobered the market. In the Q1 the real estate prices jumped by more than one-third and the investments were up 60% on the similar period of last year. According to Chinese specialists, the limitations introduced on the loans for construction projects will lead to the decrease of construction steel demand growth in the second half year.
In general, the analysts that represent the Chinese metallurgical association CISA believe that in the nearest months the national steel market will keep rather stable. The prices increase is likely to continue but will be rather low. At least, many specialists today doubt that rebar this autumn will reach CNY 5000 per tonne.
At the same time Chinese companies still have a strong stimulus for the prices increase, such as raw materials cost. Chinese steel manufacturers are likely to have got into the trap prepared by the lead iron ore manufacturers again. According to the media, among all Chinese metallurgical companies Hebei Iron & Steel only has signed the quarterly contract on iron ore supplies. The others are kindly invited to the spot market, where the price for Indian 63.5% concentrate reached USD 190 per ton CIF China having added more than 20% in recent month.
By this reason Chinese steel manufacturers keep on increasing sales prices. Among the leaders Baosteel only did not increased HR steel quotations in May, however, the other kinds of products increased by CNY 200 per tonne to CNY 600 per tonne. The other lead steel producers have not followed Baosteel despite expectations.
As per MySteel, in the end of last week HR steel and rebar prices in Chinese market started growing again. The demand is characterized by the local experts as stable. By all appearances there is no threat of Chinese dumping in global steel market. But the offers from Chinese companies in the foreseeable future will obviously make the lower edge of the prices interval and the supplies volumes are likely to keep increasing.