After Baosteel announced a sharp factory price cut in July, Chinese steel market is hit again by the news that export tax rebates will be reduced. As a result, the spot price of rebar now is CNY 3340 per tonne, and the top price in April was CNY 4800 per tonne.
The dramatic decline of Chinese steel price has made many traders fall from heaven to the hell.
Reporters leaned recently that in the end of May, a Fujian steel trader had simply disappeared after the steel he stocked made him lose CNY 2.5 billion. An insider introduced that this trader had hoarded almost 350,000 tonne of steels through electric trading earlier this year and the cost was CNY 4500 per tonne. More shockingly, steel traders in the Northeast China are suffering from a 30% loss caused by steel hoarding.
However, these steel traders are desperate to change their destiny. Some Zhejiang traders are able to do that by selling short in the futures market and part of their loss is recovered. What behind their back are all kinds of disadvantages: high steel stocks in Chinese domestic market, iron ore price rise planned by the big three providers and the round of steel price cut led by Baosteel.
Industry insiders told reporters that some steel mills call for slowing production rather than cutting price. But more mills think that the earlier the price is cut, the easier it is to keep cash flowing. Besides, it is the government, not the steel mills that is in control of slowing production
Recently, the Chinese steel demand is in the off seasons and the price thus cannot be raised. As the high iron ore price is gradually to be reflected in the cost, the future will really be a hard time for Chinese steel mills.