China’s Medium Plate Market Condition in August
Prices of medium
plate in
China fell throughout the month of August; however, compared to April's plunge the August decline was moderate.
By Wednesday, August 31, the mainstream market price for 20mm carbon
plate was RMB 3'600/ton ($444/ton) in Shanghai, RMB 3'650/ton ($451/ton) in Tianjin, and RMB 3'900/ton ($481/ton) in Guangzhou.
1. Apparent Consumption
The past two years saw the establishment of several medium
plate production lines as producers hoped to cash in on the booming global steel market. Naturally, this meant that the growth of medium
plate output has shown a significant increase recently.
During the January-June 2005 period, the accumulated growth rate of output of medium
plate was 15.5 percent. In June alone, the growth rate jumped to 26.35 percent.
Meanwhile, according to the statistics from Customs, the volume of imported medium
plate in June was 123'100 tons, which was lower than that of the previous year but higher than that of May. The export volume was 164'700 tons, an obvious increase compared to that of last year and a slight increase compared to May. Generally speaking, the import and export of medium
plate has had little impact on the domestic steel market.
2. Market Trend Since April
With the rapid capacity expansion of domestic hot rolled coil and the increase in the volume of products put into the market, the market share of medium
plate has been taken over and influenced by HR coil.
With the exception of one week in early July, prices of medium
plate have taken significant hits once the steel market entered a downward trend in early April. In fact, after the one bright week in July, medium
plate prices began to decline at a quicker pace than HR prices.
Due to the rapid decline in prices in
China, steel plants have begun to focus more on exports. However, since the international market trend is not clear, there are few inquiries. Recently, prices accepted by buyers have decreased, as have the export volumes. According to leading traders in the Shanghai market, medium
plate was traded at about $500 CFR level in August.
3. Market Analysis of China's Medium Plate in August
The essential reasons that lead to the price slump for flat rolled products since April are the rapid increase in steel products output from newly expanded and centralized
production capacity and the macroeconomic regulations, which restrained increasing demand and lead to a supply and demand imbalance. Influenced by the invasion of hot rolled coil and traders' profiteering attitude, the inventory level of medium
plate has been high. This is the main reason why the price of medium
plate keeps decreasing while the price of hot rolled coil is temporarily stable. Speculations and the high cost of inventory are the direct reasons preventing an even more rapid decline in medium
plate prices.
3.1 Analysis of Supply
As mentioned before, the
production capacity has been rapidly expanding as of late, greatly increasing the product volume in the market. In early 2005, a series of control and regulation measures, such as the cancellation of the export tax rebate and the decrease in the rate of tax rebate by 2 per cent for finished products, made export difficult. This led to an accumulation of product in the domestic market.
3.2 Analysis of Demand
The growth rate of
China's economy slowed to 9.5 percent this year, but medium
plate producers failed to see the danger and kept on increasing their
production.
Nevertheless, the
automotive, machine, household appliance and
shipbuilding industries have all seen a slow down in their growth rate.
Furthermore, the
shipbuilding industry, which was a major consumer of medium
plate, started to prefer using hot rolled coil for small inland vessels and high quality cold rolled coils for cargo liners.
3.3 Analysis of the Market
During the period of the price decline in early April, the inventory of medium
plate also decreased. In early July, with the increase in the price of hot rolled coil and the recovery of traders' confidence, the market price of medium
plate was up in some regions. Many traders actively placed orders with steel plants, which led to an increase in inventory and a decline in price.
The inventory of medium
plate in the Shanghai market in the middle of August was estimated at about 500'000 to 600'000 tons, which is a fair increase compared to previous periods.
4. Future Prospects
From the current market condition, factors that caused the decline in the price of medium
plate since April have not improved considerably. The
production capacity is now further expanding, which is not very optimistic for the future of the market.
For the current price system, the price difference between flat rolled products and long products is around RMB 1500/ton. Under the reversed situation of supply and demand relations, prices of flat rolled products are gradually closing in on long products, and medium
plate is likely to be the first one whose price comes close to that of long products.
Therefore, the price of medium
plate will be in a trend of obvious decline with slight fluctuations for the foreseeable future.
The price slump in South
China on August 29 was due to the factory price reduction of Shaoguan Steel, Liuzhou Steel in south
China, as well as Anyang Steel and Xinyu Steel (these two steel plants have a great influence on southern
China steel market) on August 26. Another reason is the price in the southern Chinese market is relatively high compared to the rest of the country