Chinese HR and CR prices seeing rapid decrease

The macro-control measures began to show their effects on the HR and CR steel market over the past week. Under the capital pressure, the traders lowered the prices in order to cash in their products. Furthermore, the sluggish commercial activity and inventory increase intensified the downward trend. Therefore, HR and CR prices saw rapid decreases. By the end of the trading on June 26, the average price quotation of 5.75mm*1500*C SS400 in Tianjin, Shanghai and Lecong is down RMB 170/mt ($ 21) to RMB 4'267/mt ($ 533), that of 2.75mm*1250*C SPHC is down RMB 43/mt ($ 5) to RMB 4'650/mt ($ 581). The average price of imported 2.0mm*1250*C 08YU has remained constant at RMB 4'625/mt ($ 577), excluding the prices in the Tianjin market. On the cold rolled side, the average price of 1.0mm*1250*2500 ST121.0mm*1250*2500 ST12 is down RMB 126/mt ($ 16) to RMB 5'317/mt ($ 665), and that of 1.0mm*1250*C ST12 is down RMB 83/mt ($ 10) to RMB 5'400/mt ($ 675). The average price of imported 0.6mm*1250*C 08YU is down RMB 16/mt ($ 2) to RMB 5'267/mt ($ 658). The price drop of HR and CR over the past week is mainly resulted from the macro-control policies and will continue this trend for quite a long time. The effects of series of measures taken by Central Bank aiming at controlling the lending growth over the previous week began to be seen in the steel industry. Since the bank announced that it would control lending, there is a great capital pressure for traders in Tianjin and Lecong markets. Meanwhile, since the products they hold are mainly bought at low price, with a relatively large profit range, they lowered the prices so as to accelerate the turnover rate. However, due to the sluggish commercial activity, the market did not go well after the price adjustment. Later, influenced by this, Shanghai market also saw decrease. On the other hand, because of the great amount of supply of steel mills to all the major markets, the inventory saw certain increase, which also influenced the market. Although the unannounced export tax rebate policy has some impacts on the export quotation of steel mills, the domestic steel mills are still optimistic about their export planning. The planned HRC export of domestic steel mills for July is basically equaled to the level of the previous month. The total export of major steel mills amounts to about 540,000 mt, among which, Wuhan Steel 110,000-120,000 mt, Anshan Steel 95,000 mt, Shagang 70,000 mt, Tangshan Steel 30,000 mt, Lianyuan Steel 40,000 mt, and Baotou Steel 50,000 mt. The export price can be very low at some steel mills. For example, the HRC export price of Tangshan Guofeng for June is $ 510 FOB and its export for July is 20,000 mt at the price level of $ 510-530 FOB, $ 30-40 lower compared with the leading steel mills such as Tangshan Steel. In the background of macro-control and capacity releasing, the domestic traders begin to change their views on the overall trend of HR and CR market for the second half of the year. They believe that the well price performance for the first half of the year will not appear for the second half. In conclusion, the factors supporting higher prices are becoming weaker. Contrarily, the factors that may curb the price increase, including export tax rebate, are more and more evident. In short term, there is still some opportunity for the prices to rebound under the stimulation of price adjustment of steel mills and commercial activities.