Chinese construction steel prices unlikely to maintain upward trend

Chinese construction steel prices unlikely to maintain upward trend

Chinese construction steel prices fluctuated but appeared to exhibit an upward trend all throughout the past week; however, the transaction volume told a different story. Upon the opening of trade last Monday (October 31), HRB335 rebar prices followed an upward trend by a small amount compared to the previous week. Nevertheless, they had declined slightly by the close of trade on Thursday, November 3. HRB400 rebar prices kept going up last week. Wire rod prices gained momentum last Monday, but were stable on Wednesday, November 2. Prices then dropped slightly towards the end of the week. Compared to the previous week, the average prices in the main markets and the change over the course of the past week were as follows: 20mm HRB335 rebar was up RMB 10/mt to RMB 3’013/mt ($373); 20mm HRB400 rebar was up RMB 84/mt to RMB 3’217/mt ($398); 6.5mm Q235 high speed wire rod was up RMB 7/mt to RMB 3’077/mt ($381). The decline in prices after the initial increase over the past week was due to following reasons: 1. Since business was normal during the price increase of the previous week (October 24-28), traders continued to raise their prices at the beginning of last week (October 31-November 4). 2. Dealers expected a price increase, and leading traders did not disappoint as they raised their prices. This can easily be seen in the Shanghai market, which has a great influence on other domestic markets. 3. At beginning of the past week, prices in the Shanghai market continuously went up. However, they stabilized and even dropped slightly later in the week as other markets did not follow suit. 4. The increase in opening price last week saw transaction volume gradually decrease throughout the week. A lack of concluded deals led to a slide in HRB335 rebar and wire rod prices during the week. 5. Some specifications of HRB400 rebar were in short supply in China’s three major markets on Wednesday, November 2. While prices in Beijing and Shanghai were stable, or even slid over the weekend, Guangzhou saw a large increase in its market prices because supply was particularly short there. A majority of traders think prices will go down. However, some traders indicate that there is not much room for prices to fall thanks to the current low inventory level. In summary, the price increase in the first half of the past week was not due to an increase in demand. The major factor of price decline in the latter half period of the past week was due to the low transaction volume earlier in the week. Although inventory in the market decreased sharply, the inventories of the steel mills’ still remain high. It is expected that prices in China’s main markets will continue to go down, as steel mills have not cut their output uniformly. SteelOrbis Shanghai