The steel prices in China recorded an impressive rebound on week opening. The nearly more than 3 months long hiatus was broken if not with a bang but certainly remarkable.
A momentary rebound was on the cards as the plummeting steel prices had dipped below the cost in most locations. At the same time depleting stocks had reached a point where with the passage of monsoon some revival in activity was round the corner.
It is reported that price for Rebar fell to some CNY 3920 per tonne from a ceiling of CNY 4550 per tonne since mid April.
On July 20th some prominent mills viz., Laiwu, Shoguan and Guangzhou steel mills raised their EXW prices by CNY 30 per tonne bolstered by an imminent prospect of bottoming out However the same yardstick cannot be applied in flat product prices which showed rebound by up to 5% is likely to prove a flash in pan in the absence of demand.
This can best be imputed to the positive momentum set in with a buoyant stock market, the price for bulk material soared sharply this week, steel futures price picked up CNY 200 per tonne (USD 30 per tonne) within two days, sending positive feeler to the steel market.However the rally is likely to fizzle out soon owing to the following reasons
1. Credit crunch has been aggravated by the tightening credit policy of the government.
2, Steel majors Baosteel and Anshan Steel, these major steel mills consecutively cut their ex-mill prices setting a negative sentiment.
3. Raw material prices viz, iron ore, rates have plummeted in the last 1 month taking the wings of cost push price hike.
Though steel price started to rise this week, physical transactions still remained very low. Insiders told the reporter that most people adopt wait-and-see attitude. Some traders suspended transactions with expectation that steel price would go up.
Most large scale steel mills did not really cut production during the past three months when steel price kept falling. It is impossible for them to resort to production cutback when steel price rebounds.