/Rusmet.ru, Victor Tarnavskiy/ Ukrainian exporters decrease the prices in Europe and in Middle East. Chinese suppliers do that in Eastern Asia. In late May even the largest Chinese companies had to reduce export quotations for HR steel to $680-700 per ton FOB. The other suppliers offer these products at much lower prices. Smaller steel suppliers offer HRC at $620-650 per ton FOB and traders decrease the prices even lower. In particular, Indian buyers receive the offers from China at less than $600 per ton CFR.
Other regional manufacturers followed the Chinese and decreased the prices. The prices for Chinese HR steel fell to about $700 per ton FOB. Taiwanese exporters reduced HRC prices to $670-680 per ton FOB. Taiwanese China Steel, as well as Japanese Nippon Steel и JFE Steel still count on domestic prices increase in July, when the prices for imported coking coal and iron ore are expected to rise.
The main reason of the decrease in Eastern Asia, as well as in other regions, in excessive supply. In the first four months of the current year China exported 13.0 mio tons of steel products, which was almost twice as much as in the same period of last year. More than 80% fell in the following five countries: Korea, Japan, Taiwan, India, and Vietnam. In April 4.31 mio tons of rolled steel were exported, including 1.6 mio tons of HRC. Eventually in Korea rolled steel stockpiles reached the maximal level since May 2009. Vietnamese traders started searching the possibilities of re-export. The demand for flat steel in the region fell. This was the reason for dumping policy of some Chinese exporters.
Chinese companies export mostly excessive steel. In April export share in total output volume amounted 7.8 % only. In July-Sep. 2008 the figure was 16-18%. The problem is that recently steel products supply significantly exceeds the demand even in China. The reason is well known. This is the government program focused on preventing the economy overheating. Providing the program Chinese government cut the finance income into the economy, especially into the construction sector.
According to Chinese English-speaking media, Chinese government is solving a hard problem now. It should choose between two options: to resume investing money into the real sector of economy in order to withstand new wave of the crisis in Europe or to continue tightening the screws. Steel consumption in China depends on the final decision.
The situation in Chinese domestic market has stabilized. Rebar and HR steel market prices amount 4000-4200 yuan ($586-615) per ton from the stock. October contracts for rebar at SHFE commodities exchange slightly exceed 4200 yuan per ton. Traders and consumers are very careful and try not to collect large stockpiles. The forecasts for the second half-year of most analysts are moderately pessimistic: a fall is not expected, but there is no ground for the prices increase either.
According to some sources, Chinese government can reduce export in order to prevent antidumping claims against the national steel products. In particular, from June 1 the partial VAT refunding for HR steel exporters can be cancelled and reduced for CRC and galvanized steel suppliers. However, Chinese association CISA denied this information.
It is possible that in the nearest weeks the prices of exported Chinese products will stabilize and the cheapest rolled steel will be removed from the market. However, further prices changes will be determined mostly by internal factors.