Even low inventories cannot stop Chinese flat rolled price decline

Tuesday, 07 November 2006 14:06:45 (GMT+3)   |  
       

SteelOrbis Shanghai Over week 44, the flat rolled market continued its downward trend of the previous week, with sluggish commercial activity and a slight decline in inventory. On November 6, the average price quotation of 5.75 mm x 1,500 mm x C SS400 hot rolled coil in Tianjin, Shanghai and Lecong was down RMB 10/mt ($1) week on week to RMB 3,657/mt ($464), while that of 2.75 mm x 1,250 mm x C Q235B was down RMB 83/mt ($11) to RMB 3,890/mt ($494). The average price of 1.0 mm x 1,250 mm x 2,500 mm ST12 cold rolled sheet is down RMB 67/mt ($9) to RMB 4,733/mt ($601), and that of 1.0 mm x 1,250 mm x C ST12 is down RMB 20/mt ($3) to RMB 4,683/mt ($594). As regards hot rolled, prices continued to go down at the beginning of week 44. However, when Shagang decided to maintain its ex-factory prices for November at a high level and Angang sharply hiked its ex-factory prices for December, the Shanghai market started to see a rebound, after which the other markets also became stable. Nevertheless, prices declined a little again towards the end of the week due to the bad trading performance. The cold rolled market, on the other hand, showed a continuous downward movement over week 44. This sliding trend prevailed despite the steel mills' ex-factory prices which continued to fluctuate at high levels, and also in spite of the high inventory costs. Even the low inventory cannot stop prices from going down, which makes traders even more pessimistic about the future. If the steel mills have to lower their ex-factory prices because of sales problems in the near future, market prices will drop sharply. From mid-October, the total decrease in Chinese flat rolled market prices reached RMB 200-300/mt ($25-38). In spite of the bearish commercial activity, the low inventory continues to support the market. At present, the steel mills are trying their best to export as much as possible due to the anticipated new export tax rebate policy. The new tariff policy on semis exports has already resulted in a price decrease in billet and narrow steel strip. If the medium and wide steel strip prices decline in the future, hot rolled coils will also see a drop. All in all, the prospect for the steel market is quite gloomy.

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