The last week has been a path breaking for the domestic market in China. The pall of gloom which had engulfed since the spring festival seemed to be dispersing for a change giving solace to the players and some glimmer of hope as the summer approaches.
Ironically just after the Japanese catastrophe there was some glimmer of hope which vanished in no time as the reality dawned about serious logistical and quality issues. However the core issue of demand within China always remained unanswered and the token revival turned out to be escapism.
Despite all reservations demand had to unravel at some turn given the touted growth proclamations of the government in the 12 Five Year Plan and the seasonality unfolding in the normal course.
Remarkable recovery in the last week … % devoid of any triggering factor indicates change in the dynamics for real. The typical fickleness of speculative factors has been noticeably absent. The steady rather than mercurial growth in prices certainly sets at rest suspected fragility.
The period of March to May is typically of peak demand as construction activity picks up. Hence traders’ stockiest who had been subdued post spring festival have become resilient and active with an optimistic outlook as the prices improve in anticipation of demand. With slew of infrastructural and housing projects on the anvil the aspirations might not turn out to be misnomer for a change.
The euphoria has been contagious in the sense that mills have been ramping up production MoM touching an average daily production of 1.94 million tonnes in the middle March a hike of 2.18% over February
Although with the moorings of a sustained revival and growth in steel demand and prices the undertones of realism and caution is always advisable. Some of the insiders opine the revival will be short term. The resounding growth in production might prove to be its own nemesis. With the inventory of 5 major steel product touching nearly 18 million tonne on 25th March and destocking going on at snail pace the horizon looks hazy.
( source: www.steelguru.com )