Chinese semis hit by over reliance on export market

SteelOrbis Shanghai Influenced by the sharp decline in finished steel prices, Chinese semi finished steel prices saw a massive decrease compared to last week. Furthermore, regress in exports caused steel mills to panic further. The latest figures released by the Customs indicated that, the semi finished steel exports for June totaled 1.04 million mt, up 82.45 percent year on year and up 52.9 percent month on month. The rapid increase in semis exports had triggered the price increase. However, while entering into the last ten days of June, the demand in Southeast Asia shrunk considerably. The lower semis exports resulted in the sharp decline of both domestic and export prices of semi finished products. According to the sources at the steel mills, many steel mills are trying to develop the market in Middle East and Europe after being blocked by the Southeast Asian market. If they can breakthrough, it will be a strong support to the domestic prices. On July 12, billet prices decreased RMB 100-150/mt ($13-19) week on week and slab prices decreased RMB 300/mt ($38) in domestic Chinese market. With the overall sharp decline in all steel products throughout last week, rolling mills have almost no intention to purchase products, which led to the sluggish commercial activity for billets. Some market players said that in order to maintain the normal production, some semis producers began to carry out the value-maintained policy, that is, they first send the products to the steel mills and wait until the mills manufacture the finished steel and sell them, then they set the semi finished steel prices according to the sales prices of steel mills, so as to ensure the profit of steel mills. After experiencing a sharp decrease since the end of June, Chinese semis prices have already descended to a relatively low level, but the downward trend seems unlikely to stop at present. The market is expected to maintain the downward trend next week; however, the decrease range may be less.