The Asian wire rod market has remained weak in the middle of May with ex-ASEAN mills cutting offers to push volumes, while non-VAT offers at lower levels from China have also been present in the market. However, the recent news about possible large-scale purchase of unsold houses by local Chinese governments has supported futures prices on May 16 and the outlook for the wire rod market has become better.
Offers for ex-China wire rod from second-tier mills have been heard at $530-540/mt FOB, remaining stable on average compared to last week, while reference deal prices have been heard at $520-530/mt FOB. In the Chinese domestic market, demand for wire rod has remained sluggish. However, steelmakers are ready to increase their offer prices in the near future as rebar futures prices have seen a rise of 2.38 percent on May 16 compared to the previous trading day.
On May 15, news has emerged from Bloomberg that China is considering a program for local governments to start a campaign to buy unsold buildings from distressed developers, aiming to cut inventories in the property market. This measure may be taken together with the program to increase affordable housing. There have been reports from some cities like Hangzhou, confirming that the local government may buy new apartments, using them for rental purposes in the future.
The workable prices for ex-ASEAN wire rod have softened to $515-525/mt FOB depending on supplier and sales destination. Wire rod offer prices from Indonesian steelmaker Dexin have been heard at $520/mt FOB, down by $10/mt over the past week and reaching the deal price levels seen in late April. Offer prices of ex-Malaysia wire rod have been heard at $525-535/mt FOB to distant markets, while to some neighboring buyers they could be at the lower level of $520/mt FOB or so. Export offer prices from Vietnam’s Hoa Phat have been heard at $530-540/mt FOB, decreasing by $5-10/mt over the past week, but remaining too high.
Offers for Asian wire rod have been reported at $530-545/mt CFR to the Philippines and Thailand with the lower end of the range translating to non-VAT offers from China, while offers from the ASEAN region, Malaysia in particular, have been at $535/mt CFR and higher. Buyers in the Philippines have voiced bids at $525/mt for ex-China wire rod, and very few deals have been heard at this level, signaling that the market has softened by $5-10/mt over the past week. “Only non-VAT offers could be this low, otherwise the offers are still at $535-540/mt CFR at the lowest,” a trader said.
As of May 16, rebar futures at Shanghai Futures Exchange are standing at RMB 3,703/mt ($517/mt), increasing by RMB 34/mt ($4.8/mt) since May 9, while up 2.38 percent compared to the previous trading day, May 15.
$1 = RMB 7.102