Steel prices in China have been continuously increasing for the last nine weeks - a trend which has become a matter of concern for the government. The increase in steel prices is inevitably causing further inflationary pressure. In this context, China's National Development and Reform Commission (NDRC) recently stated that both domestic demand and steel product exports need to be controlled. The NDRC went on to warn against coordinated actions aimed at pushing up steel prices.
In the last week of August, the average prices of four key steel products increased 17.8 percent year on year to RMB 4,358 /mt ($578.75/mt), which was also up RMB 57 ($7.57) or 1.3 percent from the previous week. Of these key products, the price of wire rod increased 1.2 percent week on week to RMB 3,886/mt ($516/mt), rebar rose 1.3 percent to RMB 4,004/mt ($532/mt), plate went up 1.4 percent to RMB 4,570/mt ($607/mt) and CR thin sheet climbed to RMB 4,972/mt ($660/mt), up 1.4 percent. Compared to the same week last year, the corresponding increases are 20, 26.2, 25.9 and 4.4 percent.
The boom in the Chinese steel market may currently be attributed to three main factors: strong demand, increasing costs and the general expectation for an increase in the market.
The strong demand and price hikes have been welcomed by the steel traders in China. However, these are not good news for the government. As an essential material for the national economy, the continuous price rises for steel products will be transferred to downstream industry and then the results will be serious.
However, it is not quite possible for the government to intervene in the market and regulate the price rises. Therefore, the NDRC announcement may be considered as an attempt to break the expectations in the market for a continuing upward trend. The question now is how long the rising price tendency will last? There is no clear answer yet.