Due to sluggish demand from foreign customers Chinese exporters of welded pipes have decreased their quotations by $10-30/mt over the past two weeks. On the other hand, domestic prices for welded pipes are a little firmer: their upper end remains at the previous level while the bottom end has decreased by RMB 200/mt ($30/mt) over the period of review.
Despite little interest coming from the exports markets, production of welded pipes in China is increasing: in September the output figure reached 2.76 million mt, 25 percent higher than in September 2008 but 2.5 percent lower than in August this year. Welded pipe production in China rose to 22.47 million mt in the January-September period this year, up by 19.6 percent year on year. Due to China's stimulus plan for the economy, a lot of the Chinese production capacity is working to meet demand in the domestic market.
The downstream industries in China are increasing their investments and are thus buying more steel products. China may see a 10 percent increase in GDP in the fourth quarter, which would guarantee high demand for steel products. The cost of feedstock material is another factor influencing the prices of welded steel pipes. The cost of Chinese flat steel may see a large increase in the coming period mainly due to the devaluation of the dollar and increased fuel prices, and also as spot iron ore prices are pushed up against the background of the iron ore contract price negotiations for next year. In this general context, welded steel pipe prices in China may see a rise by the end of November. On the other hand, high steel inventories in China are playing havoc with prices. However, as per some market reports, the Chinese steel market is starting to see reduced inventories of construction steel, led by the Shanghai market, and may eventually reach a situation of equilibrium between supply and demand. Overall, the pressure of strong inventories and high output levels still exerts a braking effect on Chinese welded steel pipe prices and thus the rate of increase of welded pipe prices will be slow.
Current export prices of Chinese ERW pipes, 2"-6" grade B according to ASTM A53/API 5L, are at about $600-650/mt FOB.
Current offers of locally produced welded pipes, 2"-6" Q215-Q235 grade, are being given to the domestic market at RMB 4,100-4,600/mt ($600-675/mt) ex-works. These local market prices include 17 percent VAT and are on actual weight basis.