Sluggishness in China’s section steel market as holiday approaches

Remaining on its sliding trend, China's domestic section steel market has shown a mild decline of RMB 50/mt ($7/mt) or so in the past week. As a result of the very weak trading activity, inventory levels in the market have soared significantly.

Over the past week, the prices of angles in China, excepting some large specifications, have seen a decrease of RMB 10-70/mt ($1-10/mt), channel prices have slid by RMB 0-30/mt ($0-4/mt), and I-beam prices have declined by RMB 30/mt ($4/mt), with the prices of large specifications remaining unchanged from previous levels.

Following the successively halts called by Tangshan-based section steel producers to their operations in the month of January, nearly 90 percent of local producers are closed at the start of February and the remaining 10 percent are expected to suspend their production operations in the coming week. In this context, the domestic section steel market may observe some commercial activity up to the end of this week before posting a general stagnation in the following weeks.

On the billet side, domestic billet prices in China have generally remained stable in the past week. At present the mainstream prices of 150 mm x 150 mm common carbon billet in Tangshan are at RMB 3,340 ($490/mt, tax included), with the prices excluding tax at RMB 3,250/mt ($477/mt); 165 mm x 165 mm common carbon billet is now offered at RMB 3,370/mt ($494/mt, tax included), while the prices of low-alloy billet stand at RMB 3,440/mt ($504/mt). Following the production halts implemented by section steel producers, billet demand will inevitably decline and so billet prices are expected to see stable movement in the coming period.

Although many leading mills are expected to announce their latest prices at the beginning of February, the current market is unlikely to be affected by the mills' price adjustments. Meanwhile, traders in the market appear uneager to conclude new sales, preferring to wait for the post-holiday market.

According to newly-issued statistics, China's large section production in December 2009 totaled 831,800 mt, up 299,900 mt or 56.4 percent year on year. Average daily large section production during the month in question reached 26,800 mt, down by 2,000 mt or 7.08 percent month on month. Meanwhile, domestic large section production for the whole of 2009 reached 9.4706 million mt, up 596,200 mt or 6.7 percent year on year.

China's medium and small section production in December 2009 totaled 3.4557 million mt, up 218,800 mt or 6.8 percent year on year. Average daily production of medium and small sections during the month in question reached 111,500 mt, down by 11,200 mt or 9.12 percent month on month. Meanwhile, domestic medium and small section production for the whole of 2009 reached 41.1889 million mt, up 10.257 million mt or 32.2 percent year on year.

China's large section exports in December stood at 131,000 mt, up 76,600 mt or 140.79 percent year on year, totaling $73 million in value, up $26 million or 55.06 percent compared with December 2008. The average export price was $554.65/mt. Total large section exports in 2009 reached 1.0465 million mt, down 1.7022 million mt or 61.93 percent, amounting to $609 million in value, down $1.843 billion or 75.15 percent year on year.

Large section imports in December stood at 25,400 mt, up 8,000 mt or 46.35 percent year on year, totaling $19 million in value, up $1 million or 6.19 percent compared with the same month of the previous year. The average import price was $738.5/mt. Total large section imports in 2009 reached 348,400 mt, up 89,400 mt or 34.52 percent, amounting to a total value of $256 million, down $14 million or 5.3 percent year on year.

China's medium and small section exports in December came to 18,800 mt, down 2,700 mt or 12.51 percent year on year, totaling $14 million in value, down $3 million or 18.28 percent compared with the same month of the previous year. The average medium and small section export price was $748.04/mt. Total medium and small section exports in 2009 reached 137,300 mt, down 675,500 mt or 83.11 percent, amounting to $120 million in value, down $646 million or 84.35 percent year on year.

Medium and small section imports in December amounted to 2,500 mt, down 1,300 mt or 35.18 percent year on year, totaling a value of $4 million, down $200,000 or 5.81 percent compared with December 2008. The average medium and small section import price was $1,532.04/mt. Total medium and small section imports in 2009 reached 31,000 mt, down 19,300 mt or 38.37 percent, amounting to $42 million in value, down $28 million or 39.95 percent year on year.