Chinese HR market eyes rebound
Chinas hot rolled sheet/coil (HRS&C) prices continued to decrease after the National Holidays; however, medium HRS&C tended to be stable all throughout the past week, while prices of thin product showed noticeable losses.
In the Shanghai market, the price of 5.75mm SS400 on Monday, October 24, was similar to that of the previous Monday, while the price of 2.75mm SPHC had dropped around RMB 250/ton ($31).
A change in transaction activity is one of major factors that affected the market prices. In the Tianjin market, traders had to cut their prices continuously to reach a balanced level. Even then, the transaction situation did not get better. On the other hand, there was in increase in the number of deals concluded in the Lecong market, and prices were therefore in a stable upward trend.
The increase or decrease in the inventory levels of newly arrived products is another factor that influenced the market prices. There were nearly 70000 80000 tons of
Russia and
Thailand-origin products, mainly consisting of 1.0-3.0mm specifications, arriving in Shanghai over the course of the week. This had a noticeable impact on thin products in the sagging Shanghai market. Prices of both domestically-made and imported products fell by a large amount. On the other hand, Lecong saw very few shipments arrive over the week, and some specifications were in short supply. Both factors helped bolster market prices in Lecong.
Prices and inventory levels of steelmakers also had some impact on market prices. Traders in the Tianjin market focused on selling their products as they learnt that steelmakers such as Tangshan Steel and
Baotou Steel announced their incentive policies. The steelmakers guaranteed the traders profit margins even if the traders cut their prices. Also, steelmakers inventories increased as traders lessened their orders during the period of the price drops. Some steelmakers sold their products to traders in the Shanghai market at low prices in a move to alleviate the inventory pressure. This will surely affect the future price trend.
Furthermore, close attention should be paid to the
China Iron and Steel Associations (CISA) symposium about stabilizing the market prices. The CISA meeting had some influence on traders attitudes, although market players were quick to add that it will not have a substantial effect. Before the meeting, some leading traders of
Baosteel adopted a policy that offered a refund if the prices decreased after purchasing. Also, CISA suggested at the meeting that fourth quarter output of medium
plate and HR coil should be cut by 5 percent, which will affect traders and end users.
Traders mention that they are not optimistic about the future of the market, as the current supply and demand remains unchanged. However, prices might bounce back in the short term, providing more opportunities to traders after the CISA meeting.
The above-mentioned factors will continue to influence the price trend. Taking into consideration the steelmakers inventory, prices and attitudes, market prices are likely to be stable, and may even go up, in the short term.
SteelOrbis Shanghai