Chinese steel market has maintained its freakish reputation in April with a windfall revival in domestic market. The sheen gleamed when set in the backdrop of prevalent gloom in global steel market saddled with trail of crisis.
The Chinese steel prices have maintained the lead both in purge and the revelry. One is reminiscent of the bellied expectations after Lunar Holidays in contrast with the buoyancy in other markets. At the same time relentless deflationary measures by the Chinese government did its bit to disappoint an expectant market.
Traditionally post Lunar Holidays market picks up on expectations of summer demand when the construction activity reaches its pinnacle. However spring of 2011 sprung many a surprise with the market being submerged in despair as the traders and stockiest desisted from buying unable to grapple with burgeoning stocks as mills maintained resounding production levels.
As a result the revival was delayed by nearly 6 weeks with the first sign of relief coming in April. Surprisingly the production mills all through the lull worked over time touching a 1.92 million tonnes per day in last 10 days of March. The misery in domestic market found outlet in exports registering a growth of 98% over February at 4.91 million tonnes.
April has been renaissance with prices having climbed by 2% in the 1st 12 days.
The price hike has been supported by buying and stock depletion as the seasonality seems to have finally caught up. Remarkably this has happened despite 25 basis points hike in lending rate by PBOC on the eve of market opening after Ching Ming festival.
It is believed that growth in downstream buying with the approach of season has led to reduction in inventory for the 4th consecutive week.
The construction steel inventory just before the holiday was 9.45 million tonnes down 4.38% w-o-w.
The price of raw material has shown uptrend increasing by 3% during the last week thereby enhancing the cost pressure in a already beleaguered market.
In the gung ho of sparkling revival during the last couple of weeks one should not be oblivious to neutralizing movements by steel majors raising question mark over the solidity of this revival. Some alarming happenings like reduction in May prices by bench marker BaoSteel and a roll over by Wuhan steel has given a touch of circumspection. One tends to smell speculation playing pied piper yet again.
Taking a holistic view of the meanderings in April the odds are certainly arraigned in favour of substantial amelioration in actual demand as the mercury climbs. The skewed growth in rebar prices makes the impetus transparent. Construction demand is the byword with array of infrastructural plans viz., 10 million houses , expansion of rail network and construction of water pipe lines on the anvil in 12 Five Year Plan.
Simultaneously growth in the demand from the white good and automobile sector will give the necessary fillip to the fledgling market catapulting it to maturity.
( Source: www.steelguru.comn )