China’s steel market March 4-11, 2005

China’s steel market March 4-11, 2005

Various steel products saw a full scale rising trend this past week after leading Chinese steel makers completed the bulk of their contract signature and payment collection for March. In Eastern China, distributors dealing with construction steel products initiated a round of price increases by making use of the fact that construction sites are short of resources and busy procuring product for the upcoming construction season. In detail, the weekly price increase of construction steel products and large and medium sections brushed record highs, causing some end users to adopt a wait-and-see attitude. At the same time, market personnel representing different interest groups have had diverging opinions about the future market trend. Some markets have displayed a downward trend after hitting their peak. All in all, the market price of construction steel products soared last week, as have all kinds of flat steel products and large as well as medium section products. 1. Construction steel products: On Monday (March 7th), the market price of 6.5mm high-speed wire rod and 18-25mm rebar in Shanghai surged to 3950 Yuan/ton and 3850 Yuan/ton. However, after distributors completed the real transactions, rebar prices began to slide slightly. By Thursday (March 10th), the prevailing transaction price of 6.5mm high speed wire rod and 18-25mm rebar in Shanghai reached 3950 Yuan/ton and 3740 Yuan/ton, up 210 Yuan/ton and 120 Yuan/ton over that of previous weekend. 1) East China: Major markets in Eastern China saw 160-270 Yuan/ton price increases. Hangzhou kept pace with the trend in Shanghai, with market prices of 6.5mm high-speed wire rod and 18-25mm rebar rising 200 Yuan/ton and 160 Yuan/ton to 3950 Yuan/ton and 3860 Yuan/ton respectively. 2) Middle-South China: Driven by Eastern China, the market price of construction steel products in Middle-South China saw a significant increase. In detail, wire rod and rebar prices in Guangzhou rose 300 Yuan/ton and 180 Yuan/ton to 4010 Yuan/ton and 3970 Yuan/ton respectively; Zhengzhou saw 300-320 Yuan/ton price increases to reach 3930 Yuan/ton for wire rod and 3800 Yuan/ton for rebar; other markets experienced 200-300 Yuan/ton price increases. 3) North China: The market price has climbed stably as the NPC and CPPCC in Beijing has had certain influence and local markets have had comparably larger inventory levels. Thus wire rod and rebar prices rose 180 Yuan/ton and 190 Yuan/ton to 3800 Yuan/ton and 3720 Yuan/ton respectively; all the other markets saw 200-270 Yuan/ton price increases. 4) Northeast China: Though the market demand of construction steel products in Northeast China area has not fully taken off, the market price still rose 50-200 Yuan/ton due in part to the higher ex-factory price levels of local leading steelmakers and pressure from the surging prices in other regions. 5) Southwest and Northwest China: The market price of construction steel products in these two areas has shown a healthy increase. For example, the Chongqing market saw 200 Yuan/ton price increases for wire rod and rebar, reaching 4000 Yuan/ton and 4050 Yuan/ton. Other markets witnessed 150-400 Yuan/ton increases. By Thursday (March 10th), the average transaction price of 6.5mm high-speed wire rod and 18-25mm rebar in 28 major China cities reached 3912 Yuan/ton and 3860 Yuan/ton, rising 227 Yuan/ton and 224 Yuan/ton over that of previous weekend. This created the highest weekly price increase in past years. The rising raw material price, large billet/slab export, construction projects’ resources stockpiling as well as a better expectation toward the future market promoted this round of price increase for construction steel products. The sudden price surge for construction steel products this past week led to bumper profit for those stocking resources. However, the steel price in Southern China has begun to drop somewhat as distributors face heavy capital pressure. Since neither rising production costs nor booming market demand have changed, and keeping open the possibility of short supply in the future, it is estimated that China’s construction steel products will experience small price increases next week. When market demand in Northern China begins to pick up fully and the market price difference between Southern and Northern China narrows, construction steel supply and demand situation in South China will soon improve, driving the market price even higher. 2. Medium plate: China’s medium plate market went up largely this past week under the push of construction steel products and HR sheet/coil. In detail, Eastern China took the lead with 100-250 Yuan/ton price increases; Northern China saw comparatively smaller increases, and Northeast China remained stable. All the other markets saw 50-200 Yuan/ton price surges. By Thursday (March 10th), the average transaction price of 8mm and 20mm medium plate in 28 major China cities reached 5304 Yuan/ton and 4935 Yuan/ton, up 134 Yuan/ton and 107 Yuan/ton over the previous week. Since the medium plate market has long stayed at low price levels, the expanding market demand has begun to stimulate prices. Moreover, thin spec medium plate saw large increases due to short supply. China has not recently added new productivity for medium plate, and imports have remained unchanged. On the other hand, down stream industries such as shipbuilding, machinery processing and steel structures, have all had booming demand for medium plate. Thus it is estimated that China’s domestic medium plate price will continue it stable rise. 3. CR/HR sheet/coil: China’s domestic prices of CR/HR sheet/coil continued their upward trend this past week. The extent of the price increase for HR sheet/coil exceeded that of CR sheet/coil. Furthermore, the price increase extent of HR medium plate/coil exceeded that of HR sheet/coil. By Thursday (March 10th), the average transaction price of 1.0mm CR sheet, 2.75mm HR coil and 5.5mm HR coil in 28 major China cities reached 7374 Yuan/ton, 5539 Yuan/ton and 5302 Yuan/ton. Those prices represented increases of 68 Yuan/ton, 93 Yuan/ton and 109 Yuan/ton over that of the previous week. Regarding the international market, as stock levels in the US have been extremely high, certain local steelmakers adjusted their ex-factory prices down. The European market price stabilized at a high level, and some steelmakers even tried to raise prices due to increasing raw material cost. The market situation in Asia deserves a closer look. In Asia, Nippon Steel Corp of Japan raised its domestic flat steel products selling price by 10000 Yen/ton. JFE quickly followed suit. Meanwhile, South Korea’s POSCO as well as Taiwan CSC plan to raise prices. Since Asia has been the major HR sheet/coil export destination of China (statistics show that 78% of China’s HR coil exports went to Asia in 2004), the stable Asian market will help China expand exports. At the same time, 66% of China’s CR sheet/coil imports originated from Asia. Thus the high price levels in Asia, combined with low inventory levels in China, will likely keep the domestic price of CR/HR sheet/coil at its recent highs. 4. Large & medium section: China’s domestic large and medium section market saw prices rise last week as well. By Thursday (March 10th), the average transaction prices of 5# Q235 angle, 12-16# Q235 channel and 25# Q235 I beam in 28 major China cities reached 3723 Yuan/ton, 3698 Yuan/ton and 3711 Yuan/ton. Those prices represent increases of 76 Yuan/ton, 88 Yuan/ton and 61 Yuan/ton over that of the previous week. However, China still sees a surplus for small spec H beam since related manufactures failed to coordinate on output and market share, leading to weak prices. Even then, based on the price difference with other product varieties, it is estimated that the H beam market may recover soon. All in all, it is forecast that China’s large and medium section market will likely see increases during the present week.