It is reported that entering April 2011, pig iron market is on the horns of a dilemma that except Hebei and Xuzhou, the rest markets seems still keep out of the uptrend. Most iron plants show pale confidence on the rebound market and hold a wait-and-see attitude towards future. Market players also ride on fence.
This round of price rebound has some similarities with the rebound bobbed in last July. Both are initiated from the bullish billet market in Hebei province, and later spread to steel products, iron ore and pig iron around China. Well, the difference is that, many uncertainties are the decisive factors affecting the market this year.
Firstly, different economic environments in and out of China wrap the market with hazy air.
1. Tight monetary policy lays big pressure on the cash flow of Chinese enterprises. This year, The People’s Bank of China (PBOC) increases the deposit reserve for a third time. The deposit amount freshen the historical high by reaching to CNY 2 trillion accumulatively, accounting for 20% of the total lending fund. On April 5th 2011, the PBOC lifted the interest rate for saving deposit and loans by 0.25 percentage points. This is the 4th time of rate lifting in half a year since last October, thus, the latest rate for benchmark one year deposit would be increased to 3.25%, while lending rate would be set at 6.31%
2. The turmoil in Libya and the earthquake in Japan that dragging the global economy from warming up will bring a lot of uncertainties to the future economic pattern
3. What’s more, market is carefully watching the power limitation appeared in some areas in China, for which might stir up a grand-scale movement of energy conservation and emission reduction
Secondly, market varies at upstream and downstream, which gives limited support to pig iron market. Although situation turns good for billet and steel market, it is still need time to prove the endurance of prosperity and the expansion of the impact. It is too early to define as a rebound now, for the steel market is hardly to have an evident rebound at least in a short time. Tiny price adjustment is expected to become the mainstream in the market later. As for raw material market, prices of iron ore and coke are in correction, amid prices of imported iron ore and ore concentration rise a bit after April 5th 2011. Comparing with last year, pig iron price gets little support from raw material cost.
Thirdly, downstream users hold a wait and see attitude. Currently, most steel mills feel hard to make the April. Procurement plan since that they get no clear information from the ankylosed pig iron market and that they have sufficient inventory. Many steelmakers decide to follow their Mar. benchmark price for procurement. On the contrary, some iron plants push up their EXW prices spurred by the boosting billet price and steel futures contract. But traders prefer to ride on fence as there is little spread for them to operate.
( Source: www.steelguru.com )