Measures and lower exports influence CR and HR market

SteelOrbis Shanghai In addition to the recently taken macro-control measures, the changes in the exports market has also drawn Chinese flat steel prices into a downward spiral. Hot rolled coil prices decreased around RMB 100-150/mt ($13-19) and cold rolled coil prices around RMB 50-150/mt ($6-19) week on week. The market prices have fluctuated up and down through the week because of the implementation of macro-control measures and the pessimistic opinions in the market on one side, and high ex-factory prices of the mills on the other side. Nevertheless, the result at the end of the week was indicating a decline. In addition to the macro-control policies on the economy, the beginning of summer holiday in Europe has led to a decline in the quantity of orders received from this market. Meanwhile, the acceptance level of high hot and cold rolled product prices in Southeast Asia is also decreasing. Export tax rebate reduction was expected to be announced in the beginning of July. Therefore, major steel mills had accepted many orders for exports before July. However, the mills can now fill only 50 percent of their order books due to higher export offer prices which take into account the possible export tax rebate decline. Therefore domestic supply may increase in July. After the panic sales began in the domestic market, some traders who were in need for cash reduced their prices by a large margin. Then, some other traders preferred to purchase the former ones' products, which were cheaper then the ex-factory prices. Therefore the market prices went stable again, with even some slightly rebound. However, under the expectation of further macro-control measures and the increase in market supply in the future; all market players are expecting an overall downward trend. Last week, Wuhan Steel hiked its hot rolled products' ex-factory prices by RMB 200-300/mt ($25-38), but the market did not follow up and the prices continued decreasing. On the other side, the quantity of imported flat products is low and their prices in the domestic market have not changed notably. In conclusion, the market prices are mainly influenced by the execution of macro-control measures, unclear export situation and increased domestic supply expectation, which resulted in the overwhelming pessimistic attitudes towards the market. Therefore, it is hard to change the downward trend in HR and CR prices in short term.