The Chinese domestic steel market was set ablaze on last week opening with a cracker of performance gaining almost 2%. At the helm of the inferno was rebar prices jumping by a whopping 2.7% followed by HRC clocking a healthy 1%. The most remarkable thing about this explosion has been its uniformity across the country. Understandably the Chinese futures has been sowing seeds of growth with a gain of 200 point in the last fortnight but the present has been idiomatically 2 steps forward and 1 step back.
The queer rally which commenced on 19th July soon wound up with an equally discouraging roll back as demand was non existent. However August October is typically a phase of hiked consumption on the eve of winter. This year the added dimension of abject demand in the last 4 months has evidently led to depleted stock.
In general, many of the middlemen in steel industry are leveraging the advantage of recent policy alterations and relaxed credit leading to sufficient fluidity in transferring steel maker’s inventory to social stocks.
The recent flurry in prices had mirrored familiar symptoms being propelled by surging futures based on relaxation of monetary regulations, and approach of autumn suitable for construction. In the milieu one looses site of the core issues of ever sagging demand from key sector, viz construction, automobile, white goods etc.
Steel traders also become a little concerned instead of the joyful mood at the beginning of this round of sharp rise. Especially the up and down early this year remind has aroused uneasiness among many traders. They have no idea whether there is more room for steel price to rise and they are also worried about the obvious comparison between fast rising price and low trading volume. High price without real trading will only bring about empty prosper.
Another fact is that after August, East China will experience very hot summer weather, so the downstream demand will also decline. Following the collective release of bottom demand, the procurement enthusiasm will become exhausted, as there will be no more rising demand and no more support for the continuous rising of steel price.
IN fact the first signal appeared on August 4th 2010, when the day on day surge in long products stopped while flats started down movement.
The coming days will decided the direction Chinese market will take.
The Chinese Long Product Price Index CLPPI increased by 181 points in this week whereas the Chinese Flat Products Index CFPPI also continued inclining by 89 points. The overall price index CHISPI raised by 129 points.