As a result of the sharp slump in steel prices in recent times, the Chinese domestic steel market has gradually increased its resistance to price decline. In this context, China's domestic long products market registered a reduced fall over the past week. However, the continuing ascension of market inventory levels indicates that no change has yet taken place in the supply and demand relationship, and so there is still room for further downward movement in Chinese long product prices.
Product name | Specification | Category | Average price(RMB/mt) | Price ($/mt) | Weekly change (RMB/mt) |
20 mm | HRB 335 | 3,320 | 486 | -70 | |
20 mm | HRB 400 | 3,480 | 510 | -60 | |
6.5 mm | Q235 | 3,210 | 470 | -70 |
Last week, domestic long product prices in China remained on their downward trend. Although no improvement has been recorded in the supply and demand relationship, players' attitude has undergone a subtle change. Annoyed and upset with the high inventory levels and sluggish sales, traders are worried to see other traders buy in their materials. In these cases, they show great caution when a buyer seeks to make purchases in quantity and proceed with shipments only after confirmation from end-side buyers.
Meanwhile, traders have also been slow to place orders with mills on account of the bearish market situation. In order to attract more orders, the mills have had to lower their ex-factory prices. Last week, 15 mills reduced their ex-factory prices by RMB 10-400/mt ($1-59/mt). At the beginning of March, Hebei Steel Group announced ex-factory prices which were much higher than the market levels; in the past week, however, this mill was obliged to slash its prices - an indication of the great pressure the mills are under.
With market demand still sluggish, inventory levels in the various regions continued to go up throughout the past week. According to the statistics, rebar inventory in Shanghai currently amounts to 517,000 mt, up 18,000 mt week on week; while wire rod inventory has declined 9,000 mt to 120,000 mt. In Beijing, rebar inventory stands at 359,500 mt, up 7,200 mt week on week, while wire rod inventory has risen 20,500 mt to 133,800 mt.
As regards raw materials, domestic iron ore prices retained their downward movement in the past week; meanwhile, mills pushed down their coke purchase prices in order to reduce costs, and scrap prices continued to fall. All these factors have contributed to the drop in mills' production costs, thus bringing new pressure to bear on the domestic finished steel market.
Overall, under the pressure of ascending inventory levels and reduced costs, China's long products market is expected to move down further during the coming period.