Rising upstream costs help boost China’s PPGI market

Driven by rising upstream costs, China's domestic PPGI market moved up over the past week, but by a limited margin on account of the weak demand for PPGI.

Considering the bearish demand for PPGI in China in recent days, many domestic mills have maintained their offers at unchanged levels. However, against the background of the increased prices of hot rolled coils, full hard coils and galvanized coils, the production costs for PPGI have gone up, and so some PPGI producers intend to adjust their sales prices in an upward direction as their profit margins have been squeezed.

Boosted by the climbing price levels of upstream steel products, many players have regained confidence in the prospects for the future trend of the domestic PPGI market. In this context, no low-price materials are observed in the current market despite the soft demand for PPGI. With sufficient capital supply, traders are not eager to cash in their materials, thus contributing to the steady price movement in spite of the weak market demand.

Meanwhile, many buyers have still not made purchases for the traditional stockbuilding activities ahead of the Chinese New Year (February 14-21). Indeed, many traders have stated they would like to stand aside from trading for a while, commenting that it will still not be too late to build up stocks even at the end of January.

Given the speculating activities seen in the iron ore market, as well as the rapid price increases for rebar, HRC and other steel varieties, the current steel market in China has started to attracted the interest of many investors from both within and outside the steel industry. In comparison to the strong rising performance of rebar and HRC, market prices of HDG and PPGI have been moving on a milder upward trend. In the current situation, some investors seem prepared to enter the PPGI market for speculative purposes.