Construction steel analysis – Chinese market

Construction steel analysis – Chinese market

Weak demand, high inventory levels and price reductions by medium and small-scale traders all combined to ensure that construction steel prices in the major Chinese markets maintained their downward trajectory over the past week. The inventory level of major names underwent subtle changes last week. Some leading steelmakers sent products to Shanghai in small batches due to the low prices, especially of HRB335 rebar. Shipments to Shanghai from steelmakers such Pingxiang Steel, Tangshan Steel, 2672 Plant and Hubao showed a noticeable decline. A decrease in the HRB335 inventory of second-rate brand names was one of the factors that saw prices gain some ground on Friday (September 9). However, products from medium and small-scale steelmakers in eastern China, such as Jiangsu and Anhui, increased, which led to a price decline. The pricing system of Shanghai rebar may need to be reconsidered if the situation does not get better soon. Construction will become more difficult as winter approaches, which means demand in Beijing should decrease to a certain degree. Some traders sold their products at low price in an effort to move, and in some cases empty, their inventory. Although they tried to maintain their prices, the downward forces of the market won out in the end as steelmakers and traders lowered their prices. Typhoon Talim cause disruptions in the Guangzhou market. Some specifications were in short supply and it was difficult for products from other parts of the country to arrive in Guangzhou. However, there will be batches of products arriving from the local market soon. Shaoguan Steel had to initiate a price reduction in order to get more orders and prevent the inflow of products from other places due to high inventory and low sales activities. Billet prices decreased by RMB 50/ton ($6). For those steelmakers who purchased billets for rolling, their newly arrived products are likely to impact the market due to their low cost. Northeast China will be in deep winter period and some projects will be completed. Large quantities of products will still be a threat to eastern and southern China, although the stockpiling policy for winter has yet to be released. There is also some good news. Arcelor increased its flat rolled price for the fourth quarter, and several over major steelmakers are following suit. Gerdau Ameristeel Corporation, Mittal Steel, Keystone Steel & Wire Company and Connecticut Steel Corporation announced increases in their September wire rod prices by $40/short ton. Meanwhile, America’s wire rod prices increased $10/short ton over the past week. The imported rebar price of Houston increased $10-20/short ton again and witnessed strong demand. The local steelmakers were prepared to increase their October factory prices. The price increase in the international steel material market and Hurricane Katrina’s devastation of New Orleans’s infrastructure opened an opportunity for China to export. However, two factors make China’s export difficult: First, although China’s wire rod is superior to that of Turkey and other steelmakers in quality, China lacks 6mm and 9.5mm products, which affects the country’s ability to export to Europe. Second, China’s wire rod for export is quoted at $380-390/ton, but the freight to the US Gulf and East Coast is $60-70/ton, which cancels out any price advantage. The above-mentioned problems need to be addressed if China wants to export its wire rod products.