China’s domestic longs market enters another rising phase

In the wake of its previous decline, the Chinese long product market again moved up during the past week against a background of brisk commercial activity. Meanwhile, given the decline in inventory levels, domestic mills raised their ex-factory prices gradually. Overall, long product prices in China are expected to go up further over the coming period.

Following the slight decline in the previous week, long product prices again started to climb up over the past week as the trading volume registered an expansion. Generally speaking, the steady movement in the recent market has laid a solid foundation for the future market.

Demand for long products is always brisk during the April-June period, which is the hot season for construction work in China. Moreover, in the context of active housing purchases, developers have increased their investments in real estate, thereby also pushing up the demand for long products.

Meanwhile, the improvement in the international market has also offered support for the Chinese market. Two weeks ago, quotations of overseas billet to China were in the range of $380-390/mt CFR, whereas they have now already jumped above the level of $410/mt CFR aided by the recovery of demand in Southeast Asia. With Chinese importers showing no interest in the latest quotations, supply pressure in the domestic market has been alleviated to a certain extent.

With market prices moving steadily up, domestic mills have also been raising their ex-factory prices in succession. Last week, 28 mills raised their ex-factory prices a combined total of 35 times. In particular, Hebei Steel, Shougang, Shagang, and other leading mills made minor upward adjustments to their ex-factory prices, thus boosting market confidence to a great extent. Meanwhile, the slight margin of the mills' price hikes also reflects the cautious attitude of the mills, which continue to follow the market movements very closely.

Just like the increase in finished steel prices, raw material prices also stepped up during the past week. Market prices of iron ore, pig iron, and billet ascended by various margins. Since the beginning of May, coke prices again moved up, by RMB 30/mt ($4/mt), thus providing more momentum for upward movement in the longs market.

On the whole, China's domestic long products market is now moving on a strong trend, characterized by positive trading activity, decreased inventories, and higher prices. It is expected that the market will retain this upward movement in the coming period.