It is reported that a relief of the policy and ease credit in the recent period have created a climate in which the steel price is in a position to rebound, though the direction of the policy is not reserved fundamentally.
The steel futures contract started to level off from middle of July and the price turned to an upward course thereafter. By July 29th, rebar 1101 has gained some 200 points while the iii-grade spot price also exceeded CNY 4100 per tonne. On one hand, the nation reiterated to keep the economy steady and released measures of developing the big West, building affordable houses and new resources blueprint, and on the other, the liquidity is comparatively relaxed this period as the central bank supplies big funds for weeks.
This combines to make the foundation for the stock market and steel futures market to rebound. The stock index futures displayed confidence by a boost on July 28th indicating that the steel futures contract price may keep upswings for a while.
On demand’s front, uses of construction steels are expected to go up during July and August scaling down the stockpiles, while stocks of HRC and CRC are on the rise instead, as a result of removal of the export tax rebate as well as slack demand from the downstream sectors such as automotive and shipbuilding.
Recovery of the iron ore price may also to support steel price. India’s ban on export from 10 of its ports is expected to offset the increased supply from Australia and Brazil and would in a long term narrow down the margin of steel products.
In general, many of the middlemen in steel industry are taking the advantage of recent policy effects and relatively ease credit as leverage. Sufficient fluidity will transfer steelmakers inventory to social stocks, and thus boosting the steel mills’ confidence for price rise; at the same time, construction steel price is expected to stand firm this period given its cost, supply and demand.