High output pressures on long steel prices

SteelOrbis Shanghai Strong output in March pushes rebar prices down further due to high inventory level and unfavorable sales for wire rods despite a slight increase in their prices. According to China Iron and Steel Association (CISA), rebar output in March increased 16.6 percent year on year to 6.6023 million metric tons, while the cumulative volume in the first quarter reached 18.9727 million metric tons, up 21.6 year on year. On the other hand, wire rod output was 5.78 million metric tons, up 14% year on year, while the total volume in the first quarter increased 17.5 percent year on year at 15.8863 million metric tons. The increase in rebar output prevents the depletion of inventories despite the increasing demand. Therefore, early last week, the prices started to decrease in northeastern markets which had the highest prices. The high inventory pressure also forced traders in the eastern markets such as Shanghai to cut down their prices. The inventory pressure in Beijing and Guangzhou is not so big; therefore, prices have remained stable there. But on Friday afternoon, April 14, some medium and small scale traders in Beijing and Guangzhou hinted that they would reduce their prices after CISA's announcement regarding the output. The imbalanced domestic supply and demand makes the steelmakers and traders focus more on export market. It is learnt that wire rod prices are stable, and its export condition is good, lessening the supply pressure on the domestic market. However, on rebar side, exporting products to European and American markets is not easy due to the production standards issue. Being China's traditional export destination, the demand in Southeast Asia market is currently not strong, pressuring on rebar exports. Adding the increase in semi finished steel prices since late March, some rolling mills are not able to cope with the cost pressures. Therefore, more and more businesses are being shut down every day. Rebar prices are expected to drop further in the short term but the decline in production growth rate may alleviate the market pressures in the future.