In the context of a relatively active trading performance, China's domestic long products market showed stable movement over the past week. Meanwhile, inventory levels posted a continuous decline, thereby boosting market confidence to a certain extent. However, the Chinese mills have continued to lower their ex-factory prices, increasing the downward pressure on the market. In addition, export quotations of Chinese rebar have seen a mild decline, but are still unable to compete with CIS products in the international market.
Product name | Specification | Category | Average price(RMB/mt) | Price ($/mt) | Weekly change (RMB/mt) |
20 mm | HRB 335 | 3,280 | 480 | -20 | |
20 mm | HRB 400 | 3,450 | 505 | -10 | |
6.5 mm | Q235 | 3,210 | 470 | -20 |
Last week the Chinese long products market maintained an overall stability, with a mixed performance observed in the various regions. Following China's Pure Brightness Festival (April 4-6), construction sites purchased significant quantities of material during the remaining days of last week, resulting in a steady decline in inventories, which are now gradually approaching normal levels.
According to the latest statistics released by the China Iron and Steel Association (CISA), China's daily output of crude steel in late March (March 21-31) reached 1.381 million mt, equivalent to an annual output of 504 million mt, which would be higher than last year's output. Looking at the current situation, long product prices seem relatively high compared with the prices of other steel products, and so mills have started to put more emphasis on longs production. Meanwhile, in order to gain more orders from traders, mills have lowered their prices either directly or indirectly. Last week, 12 mills reduced their ex-factory prices a combined total of 15 times. Shagang lowered its prices directly, while Shaoguan Steel increased its discount rate - both these measures having a strong impact on the local markets. As a result, the mills are currently the major source of downward momentum in the market.
As a result of the export rebate adjustment, Chinese exporters have also made corresponding downward adjustments to their export quotations. Since exports of boron-added long products enjoy a 13 percent rebate, Chinese boron-added rebar is now being offered at $450-460/mt FOB, down $20-30/mt compared with the previous level. However, given the quotations of $400/mt FOB from CIS countries, the Chinese exporters still lack competitiveness, and so no fundamental improvement has been seen in the export market.
As regards raw materials, pig iron prices have continued to drop down slightly; in addition, the scrap market has maintained its weak performance, while a continuous slip has been seen in billet prices - in an overall context of slackness of trading activity.
In order to guarantee stable economic growth, China's government has enhanced its efforts to make loans more easily available. According to the latest report released by the People's Bank of China, by the end of March China's broad money M2 registered a year-on-year increase of 25.51 percent. This growth rate was up 7.69 percentage points and 5.11 percentage points respectively compared with the end of 2008 and the end of February. Meanwhile, China's new loans in the first quarter reached RMB 4.58 trillion ($670 billion), up RMB 3.25 trillion ($480 billion) year on year. The increased money supply has not only boosted demand, but has also relieved the capital supply pressure on mills and traders.
Overall, although the mills' price cuts have been pushing the market down, the improved trading levels and declining inventories also indicate that the market is developing in a positive direction. If the latter trends are sustained, a remarkable rise may very well be in store for the market in the future.