Wait-and-see for long market after CISA meeting
The buildup to
China Iron and Steel Associations (CISA) October 21 meeting about stabilizing
Chinas steel market brought a brief respite from the long product price decline.
In anticipation of the meeting, some traders in the Shanghai market increased towards the end of the week their price quotations by a large amount. The actual market prices also followed suit, making up ground lost earlier in the week.
The transaction volume slightly increased and inventories saw minor reductions over the course of the week. The smaller range of price declines over the past week was due to the wait-and-see attitudes of market players towards the CISA meeting.
Compared to the closing price of the previous Friday, average prices in the major markets on October 21 were as follows: 20mm HRB335
rebar had slid RMB44/ton to RMB 2953/ton ($364); 20mm HRB400
rebar was down RMB47/ton to RMB 3113/ton ($384); 6.5mm Q235 high-speed
wire rod had slipped RMB 56/ton to RMB 3017/ton ($372).
The following measures suggested by CISA on October 21 are related to
construction steel:
1. Sticking to reasonable prices and profit margins. This involves guaranteeing profit margins for long products and curbing substandard projects.
2. Canceling steelmakers post-transaction kickbacks to traders.
3. Instead of simply offering extremely low prices,
China needs to take the export situation in other countries into consideration.
Traders point out that it is not easy to take coherent measures, as the measures suggested by CISA conflict with their own benefits when doing business. Thus, it can be said that the CISA meeting will not have a substantial effect on either stopping the price drop or driving up the prices in the short term.
Based on its price adjustment in mid-October,
Shagang, which has a great influence on markets in eastern
China, announced on October 21 its pricing policy for the remainder of the month. It reduced its
rebar price (including tax) by RMB 90/ton and
wire rod price by RMB 30/ton.
In Beijing, some leading traders stated that they would not place orders if steelmakers did not provide them kickbacks for products ordered previously. Such a move does not help to stop the price decline as it could force steelmakers to further reduce their ex-factory prices.
Many small-scale steel mills in northern
China are either cutting their output or suspending their
production. It is unlikely that a large, continuous price drop will be seen.
Chinas
construction steel price will likely show slight fluctuations in the upcoming weeks due to oversupply.
SteelOrbis Shanghai