Softening trend prevails in Chinese PPGI market

In the week ending June 18, the Chinese PPGI market has continued to be characterized by gloom. Given the current sluggishness in the Chinese steel industry, local producers have finally compromised and agreed to reduce their sales prices for PPGI products. With market transactions slowing down, more mills have decided to cut their output levels. As of June 18, the average PPGI prices in the main Chinese cities are as follows:

At present, CGCC 0.476 mm x 1,000 mm PPGI is sold in the Shanghai, Guangzhou and Boxing markets at RMB 6,250/mt ($916/mt), RMB 6,500/mt ($953/mt) and RMB 6,220/mt ($912/mt) respectively. At the same time, CGCC 0.426 mm x 1,000 mm prices stand at RMB 6,350/mt ($931/mt), RMB 6,600/mt ($968/mt) and RMB 7,700/mt ($1,129/mt) in these respective markets.

More decreases are now needed for PPGI prices in order to reduce the large gap between prices of HDG and PPGI. Also due to the weakness in overseas demand, many local PPGI producers have started to cut their outputs and melt their inventories.

As the rainy season approaches, PPGI demand has softened in China's eastern and southern markets. It is expected that demand will decline further in the coming period as the weather becomes hotter. Most traders are now pessimistic as regards the prospects for the future market.

It is reported that the Q3 iron ore price stands at $147/mt for the Japanese market, based on the quarterly agreement signed between Japanese steel enterprises and Australian miners BHP Billiton and Rio Tinto. This represents a 23 percent increase as compared with the second quarter and a rise of 140 percent year on year. Iron ore has been a bottleneck for Chinese steel industry. If implemented for China, such a hike will increase the pressure on margins in the Chinese steel industry.