Chinese long products market sees steady trend

SteelOrbis Shanghai With its decreasing trade volume and market inventory, the Chinese long products market showed a stable trend over the past week. However, the market performance in southern regions still remained stronger than that in the northern regions. On November 17, the average price of 20 mm diameter HRB 335 rebar in the three major Chinese markets - Shanghai, Beijing and Guangzhou - was down RMB 6/mt ($1) week on week to RMB 3,127/mt ($397), while that of 20 mm diameter HRB 400 rebar was up RMB 24/mt ($3) to RMB 3,317/mt ($421). Meanwhile, the average price of 6.5 mm Q235 high speed wire rod was up RMB 17 ($2) to RMB 3,220/mt ($409). Throughout the past week, the southern China market saw a noteworthy performance. Since Guangzhou Steel increased its exports and Shaoguan Steel experienced problems in production, the supply from the steel mills to the market dropped. Furthermore, supplies from other regions are still limited, thus causing market inventory to decrease sharply. In this situation, end-users had to accept the prices offered by the traders despite the bearish demand and commercial activity. This led to a slight increase in market prices. As regards eastern China, the trading volume shrunk a little bit following the considerable rise of the previous week. Although Shagang raised its ex-factory prices of rebar at the beginning of the week, this move did not boost up general market prices. Many traders anticipated that there would be market supplies in greater quantities in the future, and thus were eager to sell their products. Prices moved steadily downward as a result. Prices in northern China saw a slight decline, mainly due to the sluggish trading performance. In addition, since the five leading mills in northern China will soon announce their prices for December, traders intended to influence price determination through the market prices, and this also contributed to the sluggish market performance. In the northeastern region, most building sites stopped their work due to the cold weather, causing a sharp decrease in demand. The leading local traders reduced their quotations so as to stop the steel mills from supplying the market. Overall, during the past week, the critical factor that influenced the Chinese long products market was the transportation problem. The major coal transportation lines experienced problems in November, leading to a drop in coal inventory in some regions and at some power plants. China's Ministry of Transportation is trying its best to arrange the transportation for coal, thus affecting steel transportation. Moreover, many transportation companies not satisfied with the current price system are seeking higher transportation charges. Nevertheless, with the declining demand for coal transportation and the rising steel transportation charges, inventories are expected to get a boost in the southern and eastern Chinese markets during the coming week. Therefore, market prices are likely to drop a little. The data released by China's State Bureau of Statistics indicates that the cumulative investment in newly-opened construction projects totaled RMB 5.2751 trillion ($671.13 million) from January to October, up 4.4 percent year on year. This cumulative investment growth is much lower than that of the previous period, and is expected to have a negative impact on future demand.