Galvanized coil markets need further demand

SteelOrbis Shanghai Galvanized steel prices continue to increase in China while comparatively stable zinc prices support the mills' profits. Last week, the increase range of thick galvanized coils was higher than that of other products with RMB 194/mt ($24) weekly increase, because steel mills reduced the supply of thick products and as the market inventories of thick products are low. The general increase in prices including all varieties was in RMB 150-200/mt ($19-25) range. In addition to low market inventories, Baosteel's second quarter price hikes also had an impact on the market prices. The trade volume still remains low and with most transactions among the traders. The rapid increase in prices also expanded the market risk because the rapidly raised market prices might not be accepted by customers in such a short time. In some regions where the inventory was comparatively high, the price of galvanized coils fluctuated slightly. The total market inventory did not increase obviously because the dealers controlled their inventories in order to reduce the market risk. Meanwhile, compared to international prices, zinc price in China keeps relatively stable due to high market inventories of zinc (approximately 50,000 metric tons in Shanghai). The trade volume of zinc improved a bit recently. On March 2, zinc prices in Shanghai market increased RMB 150/mt ($19). The price of 1# zinc was RMB 20,050/mt ($2,491) and that of 0# was RMB 20,100/mt ($2,947). On the other hand China's galvanized coil imports are in a decline. In January 2006, the import quantity of galvanized coils reduced 26,000 mt month on month to 257,000 mt. However, her exports increased 9,000 mt month on month to 86,000 mt. The rapid improvement in both quality and quantity of domestic galvanized coils, the end users and traders in China have become preferring domestic galvanized coils to their imported counterparts. Steelmakers from India and Philippines increased their galvanized coil prices recently. However, it will not have a big influence on the market because the percentage of imported galvanized coils in Chinese market is small. The market price of galvanized coils in China are mainly determined by domestic factors such as steel mills' price adjustment, market demand, market inventories and domestic production. Although many steel mills hiked up their ex-factory prices of galvanized coils recently, the market players generally believe that the stable development of galvanized coils market depends on the continual enlargement of market demand from end users.