The long product prices in Chinese domestic market continued their downward march for the 2nd consecutive week.
The icing on the cake was cut back in prices for May delivery by Shagang Steel. The steel maker’s reduction in wire rod prices by CNY 150 per tonne and rebar by CNY 300 per tonne mid way through May reflected the desperation. This abrupt price reduction by largest construction steel producer in China is likely to depress the market further.
Insiders attribute the falling steel price to the serious oversupplies in domestic market. On May 11, the dominant futures contract for RB 1010 closed at CNY 4479 per tonne, down by CNY 48 per tonne.
The prices are likely to continue sloping in the short term as steel production kept soaring by 27% YoY, touching 55.403 million tonne. The daily output averaged some 1.847 million tonnes, hitting new record high. The crude steel production totaled some 214 million tonnes, up 25.4% YoY.
At the same time, Chinese government continues to implement credit tightening measures, like increase in reserve ratio by 0.5% by Central Bank and non financing of third transaction by banks.