Chinese CRC market posts downtrend

In the past week the Chinese CRC market in general posted a decline in the major cities, while HRC inventory has been following an upward trend. As the market has not been sufficiently active, the general transaction situation is not good.

After the May Day holiday (May 1-3), there has been some disorder in Chinese CRC traders' quotations, with decreases but also some increases seen. In the Tianjin market CRC quotations show a small uptick, but due to weak demand from downstream industries the transaction situation is very average. Lecong market quotations are stable but downstream customers are mainly purchasing just to meet their needs. May and June are commonly considered as a low season. Major traders in the Lecong market are maintaining a wait-and-see approach.

Although in the later part of April when market prices softened some CRC traders started to reduce inventory, due to the large amounts of newly arrived supplies, many large traders face inventory pressure to a certain extent. On April 30, total CRC inventory in the main Chinese cities stood at 1,300,500 mt, up 16,190 mt week on week. The region which was the greatest increase in CRC inventory was eastern China, followed by southern China. On the same date, HRC inventory in the Shanghai market totaled 432,700 mt, up 9,990 mt week on week.

During the May holiday, the People's Bank of China announced that it will increase the RMB deposit reserve ratio at financial institutions by 0.5 percent, raising concerns among many traders in the market.

Generally speaking, the CRC ex-mill prices from major Chinese steelmakers for May remain high, while high raw material costs also provide support for CRC market prices. At the same time, the wait-and-see atmosphere in the market leads to weakened demand and puts downward pressure on prices. It is expected that the market in the coming period will not see big changes in price.