Price increase in N. China may encourage market

Price increase in N. China may encourage market

In an attempt to shake the market from its current state of pessimism, several steelmakers in northern China took the bold step to raise their ex-works prices. Some long steel producers in northern China recently agreed to increase their ex-factory prices by RMB 50-70/ton for II grade rebar. The producers also agreed to keep the prices of III grade rebar and wire rod stable. The price increase is expected to spill over to China's other steel markets. According to the scenario, first traders who face a stagnant market situation will feel pressure on their profit margins. However, they are not expected to accept more squeeze on their margins and therefore they will reflect the increase to their prices. Excusing the ex-factory price increase, they may even increase their prices more. Then, end-buyers from the traders will begin thinking that the price decrease came to an end and they will start to increase their purchases, which will break the negative psychology finally and let the prices to recover more. Later, the increase in the prices of II grade rebar will also help the price of other rebar and wire rod grades to increase. Moreover, the Typhoon Matsa has caused a decrease in the purchase activities for the moment. Even, the rebar prices in Beijing fell around RMB 10-30 today. But the purchases will gain more pace when the weather becomes better. And the increasing demand will be another factor pushing the prices. Therefore, we can expect a betterment in the price and purchase situation of the market towards September if the scenario works.