Chinese hot rolled market begins to slide

SteelOrbis Shanghai Affected by the price decrease in the Shanghai market, which began last week, Chinese hot rolled prices have seen a downward slide, with market inventory rising rapidly. Meanwhile, cold rolled prices moved steadily down with just a slight decline in inventory. On November 20, the average price quotation of 5.75 mm x 1,500 mm x C SS400 hot rolled coil in Tianjin, Shanghai and Lecong was down RMB 37/mt ($5) to RMB 3,670/mt ($467), while that of 2.75 mm x 1,250 mm x C Q235B was down RMB 50/mt ($6) to RMB 3,833/mt ($488). Meanwhile, the average price of 1.0 mm x 1,250 mm x 2,500 mm ST12 cold rolled sheet was down RMB 27/mt ($3) to RMB 4,673/mt ($ 595), while that of 1.0 mm x 1,250 mm x C ST12 cold rolled coil was down RMB 30/mt ($4) to RMB 4,653/mt ($592). As regards hot rolled, since the delivery of hot rolled futures for November is over, traders in Shanghai are no longer making purchases in bulk. The result is that during the past week market prices started to slide, leading to the overall downward trend in the eastern China market. Affected by the low-price supplies from Xinjiang Bayi Steel, the markets in the southwestern and northwestern regions saw a sharp drop throughout the past week. Prices in the southwestern market were at about RMB 3,400-3,450/mt ($433-439), while the price in the northwest was at RMB 3,550/mt ($452); both markets saw sluggish demand and market performance. At the same time, with its brisk commercial activity, the Guangdong market saw a steady rise to RMB 3,800/mt ($483) or so. Blocked transportation is the major factor behind the big price gap between the southern and northern regions. In addition, the leading mills in the Lecong market, such as Liuzhou Steel and Lianyuan Steel, have of late been experiencing a good exports situation, thus reducing the market supply. However, with the improvement in transportation conditions, the supply shortage in the Lecong market is expected to be relieved, leading to a drop in prices in the coming period. With regard to cold rolled, the market in China was unable to overcome its bearish performance during the past week, and a slight price decline was seen. Influenced by China's macro-control measures, fixed assets investment and bank loans both shrunk slightly, thus affecting the demand for steel products. The expansion in production capacity by some medium- or small-sized mills also hit the market to a large extent. Nevertheless, the leading mills are paying considerable attention to exports so as to avoid losses due to the sudden adjustment in the export tax rebate policy. The result has been a reduction in domestic supply. This is also the major reason why the market has been able to maintain stability over the past few weeks. All in all, the supply and demand relationship in the Chinese flat rolled market is increasingly in a state of deterioration. The decrease in the southwestern and northwestern markets is likely to force local supplies to flow towards the southern regions. In this event, a gradual slide is expected for the market as a whole during the coming period.