Chinese long products market posts strong growth

Tuesday, 09 June 2009 14:35:44 (GMT+3)   |  
       

Given the 2009 iron ore contract deal inked between Rio Tinto and Nippon Steel and also the surge in the BDI index, China's domestic long products market registered a strong increase over the past week.

Product name

Specification

Category

Average price

(RMB/mt)

Price

($/mt)

Weekly change (RMB/mt)

Rebar

20 mm

HRB 335

3,650

523

+80

Rebar

20 mm

HRB 400

3,760

550

+10

Wire rod

6.5 mm

Q235

3,630

519

+90

On May 26, Rio Tinto announced its agreement with Japanese steelmaker Nippon Steel on a 32.94 percent cut in the Yandicoogina Fines price and a 44.46 percent drop in the Pilbara Blend lump ore price for the 2009 fiscal year, failing to meet the expectations of the Chinese mills for a larger reduction. With the slowdown in the global economic recession, it is believed that market demand will gain strength and that the Chinese mills will finally accept the said decrease range. In this context, China's domestic longs market saw a strong increase over the past week despite the weak levels of commercial activity. In eastern China, currently the weakest market in the country where the trading volume remained relatively low throughout the past week,the market still maintained its stability due to the optimistic expectations for the future.

The market in the southern region registered the biggest increase in China over the past week. When prices in the northern and eastern markets went up previously, the southern market had consistently remained stable, thereby causing the northern and eastern mills to reduce supplies to the Guangzhou market in the south.

As regards the northern regions, due to the rise in inventory levels, market prices climbed up by just a slight margin during the past week. In addition, the local market has already seen a considerable jump since March, so a relaxation of the upward movement is not unexpected.

Over the past week prices of raw materials have picked up dramatically. As a result of the sharp upward adjustment made by large coal mines to coking coal prices, coke costs have been boosted; meanwhile, billet prices have also registered a remarkable rise, with the prices in Tangshan up by nearly RMB 70/mt ($10/mt) in one week.

Meanwhile, trading has appeared brisk at the futures market in recent days, indicating strong market confidence in the future. The main rebar contract has risen by RMB 146/mt ($21/mt) week on week, closing at RMB 3,756/mt ($550/mt), with the trading volume reaching 11.34 million mt; meanwhile, the wire rod contract has increased by RMB 162/mt ($24/mt) to RMB 3,674/mt ($538/mt), with a trading volume of 670,000 mt.

Overall, China's domestic long products market has reached relatively high price levels following a period of continuous growth. Looking at the current demand situation, market prices do not appear to possess much rising momentum in the short term and are likely to fluctuate at the current level during the coming week.


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