Chinese long steel prices reversed on macro-control

SteelOrbis Shanghai The macro-control measures recently taken by the government on the economy, such as increasing interest rates and the strengthening of RMB against US dollar led Chinese long product prices to regress last week with less commercial activities and increasing inventory in some regions. The range of weekly decline was especially noticeable for wire rods with RMB 40/mt ($5) and HRB 335 rebars with RMB 30/mt ($4). HRB 400 rebar prices decreased RMB 4/mt ($1) week on week. Local market prices were boosted up in the beginning of last week because Shagang, the leading steel mill in eastern China, hiked the ex-factory prices considerably. However, less commercial activities caused to a rapid price decline. Under the pressure of increasing inventory, Beijing market prices continued falling, which resulted in an overall price decrease in northern regions. Influenced by the rain season, prices in southern China also saw continuous reduction with less commercial activities. Meanwhile, National Statistics Bureau published various macro-economic data last week, including May fixed asset investments. The data worried Chinese government because of the danger of overheated economy. During the meeting held by State Council, all departments were ordered to take different control measures. As an example, Central Bank raised the deposit reserve rate by 0.5 percent point, Ministry of Land and Resources urged all the local governments to examine land violation cases, and Development and Reform Commission has begun strictly examining new projects. The above-mentioned measures directly or indirectly influenced the demand on steel products, especially the demand on rebar, resulting in a great pressure on steel products' prices. While, at the same time, long steel production is rapidly growing. According to the statistics from CISA, rebar production in May is 6.9063 million mt, up 23.9 percent year on year and the daily production is up 7,200 mt/day compared with April. Wire rod production is 6.0371 million mt, up 15.2 percent year on year and 4,400 mt/day compared with previous month. In addition, the change in export tax rebate is to be announced. It will bring a negative impact on long product exports, especially for wire rods. With the restrained demand, increasing production and blocked exports, long products market is expected to descend in short term.