The domestic steel price in China has been shedding with ever increasing velocity post announcement of rebate reduction. As a prologue to the actual drama post July15th 2010.
There has been an average drop of CNY 20 per tonne per day since 22nd June when the rebate removal was announced. At the current price level, majority steelmakers there have plunged in the red.
This rot race is lead by the market unable to withstand the deluge of stocks. Since 22nd June all pervasive negativism has gripped both domestic as well as exports. With the inevitable albeit suicidal hike in export levels by USD 40 per tonne to USD 50 per tonne volumes are being diverted to domestic market. The domestic levels have accordingly plummeted groaning under the ever increasing stock levels. In the likely scenario of baby being thrown along with the bath water mills are left with no option but to curtail costs.
Domestic levels for HRC have already touched levels of CNY 3850 per tonne and surely seems destined for CNY 3500 per tonne FOT including VAT within a weeks time. Likewise for rebar the story is even more devastating touching low of CNY 3750 per tonne FOT including VAT and the bottom no where in sight as the state sticks to its merciless policy in reality.
Resultantly the steel mills have been mercilessly pruning on the cost by severely curtailing buying of iron ore and coke. The iron ore market has already taken the beating with a fall of 6% to 17% in the last fortnight. It is reported that no new transactions are taking place except for the liquidation of existing low priced stocks at the ports.
The present stockpile at Chinese port at 70.35 million tonne is sufficient cater to the mellowed demand.
There seems to be no respite for the steel market in China at least in July which can be coined as the phase of “Rebate removal” as the market takes the beat and the dust will settle exposing the scars to be erased before winter sets in.