Chinese long products weak despite steelmakers' price hikes

SteelOrbis Shanghai Although the ex-factory price hikes by steelmakers leave no ground for decrease in market prices, some dealers who have tight capital and large inventory, began cutting their prices slightly in order to sell off their products. High semi finished and long product prices in international markets and the healthy flat rolled market are the sources of hope for the Chinese long product market. Chinese long products market trend depends on the demand from construction sites in northeastern and northwestern markets. As the demand in northeastern and northwestern China has not picked up, steelmakers in those regions have to sell their products to Eastern and Southern China, which imposes a great pressure on these markets. On the other hand, the continuous domestic scrap price increase also curbs the current downward trend in long products. Influenced by the increase in long products prices by five steelmakers in North China, traders in Beijing had to raise their offers accordingly. However, in order to avoid losses, their prices after the hike are close to the level of steelmakers' ex-factory prices. Nevertheless, the business activity has not been in line with the price level. The inventory in Shanghai slightly increased last week, further pressuring dealers. Some medium and small traders started to sell products at low price levels, forcing leading traders to follow suit. Therefore, the prevailing market prices are slowly going down. HRB 400 rebar prices even saw larger drop range due to the large stock. The Guangzhou market saw the largest drop range, as some leading traders initiated price reduction to stimulate sales due mainly to their capital pressure. Yet, it is still very different than Beijing and Shanghai, because the business activity in this southern market has not changed much. Throughout last week, the average price of 20 mm HRB 335 rebars in three major markets, Shanghai, Beijing and Guangzhou, dropped RMB 3/mt weekly to RMB 2,880/mt ($358), 20 mm HRB400 rebar average price retains the previous level at RMB 2,990/mt ($371), and that of 6.5 mm Q235 high speed wire rod dropped RMB 4/mt to RMB 2,963/mt ($368).