Long markets need more than demand

SteelOrbis Shanghai Influenced by the hikes in ex-factory prices of leading steel mills, long steel market prices saw dramatic increases in early last week. However, the increase did not last long despite the favorable domestic and export sales figures because of the high inventory pressure. Throughout last week, five steel mills in northern China hiked their ex-factory prices. Being the last week before the May Day holiday, the stockings of construction sites led to an obvious increase in the transaction volume. However, as inventories in most markets are relatively high, the market prices which showed large increases at the beginning of the week went down again especially in eastern and southern markets. As a result, Chinese long product market prices increased around RMB 30-65/mt ($4-8) weekly, with higher ranges in northern markets. Beijing was the initiator of the upward trend in the prices, but later traders' attitudes changed. Beginning from April, steelmakers began cutting the supply to traders and started to sell their products in the spot market as the market prices went up considerably. Later, traders felt obliged to reduce their prices both due to their high inventories and being obliged to compete with steelmakers. The quantity of sales realized by most traders increased obviously compared with the same period of last year, indicating that the demand is strong. However the oversupply of rebar, which is estimated at 7 million metric tons according to CISA, is preventing prices from increasing to higher levels. Unlike rebars, wire rod prices are steadily increasing, mainly thanks to the strong exports, especially to European and American markets. Most of the rebars can only be exported to Southeast Asian markets due to production standard issues. Beginning from May, the cost of new products in the Beijing market will increase as traders' orders with new ex-factory prices will begin arriving to the market. The construction activities in Beijing are still strong due to the Olympic Games to be held. Therefore prices are expected to increase in the Beijing market, which may also expand on the other markets after the holiday.