SteelOrbis Shanghai
Influenced by centralized purchasing and the ex-factory price hikes brought in by various mills, Chinese
rebar prices saw a remarkable rise in week 39, with a slight increase being registered in
wire rod. The
trading volume was slightly larger than the previous week, but still failed to meet market expectations - thus resulting in considerable disappointment among traders.
In week 38, the five leading mills in northern
China hiked their long product ex-factory prices. Influenced by this price hike, long product prices in the northern market rose in week 39. In southern
China, the low market inventory provided support for prices, causing them to move up. As for the eastern Chinese market, traders did not dare to raise their prices due to the insufficient supply in the market, therefore the market maintained stability over the whole week.
Last week, Chinese long product prices seemed still to be in an upward trend. However, both upstream and downstream sides experienced some problems.
Firstly, affected by unstable exports,
billet prices have declined steadily over recent days. According to the current price level, rolling mills are able to make some profit now. If
billet prices still keep moving down in the future, there will be a growing pressure on the long product market.
Secondly, the Chinese government recently strengthened the management of land resources and punished the top party boss in Shanghai – a move aimed at deterring leaders in other provinces from taking a stand against land utilization restrictions. It can be expected in the short term that
construction projects currently in the planning stage will be affected to a certain extent and that those already underway will experience a slowdown. Overall,
rebar demand is expected to shrink due to the impact of the government action.
In addition, the current long steel prices are now at a relatively high level due to the decrease in
billet prices. Thus, there is no sufficient momentum for the prices to go up sharply. By the end of 2006, the Chinese long product market is expected to fluctuate in a range of RMB 3,000-3,200 ($380-405).
However, since the inventories are at a low level in all the markets, long product prices are still likely to go up in the short term.