Plate price gap growing between south and north

SteelOrbis Shanghai Medium plate prices dropped rapidly last week in order to close the gap with the hot rolled coil prices. The price decline was especially sharper in northern regions, while the prices were relatively higher in coastal cities. On July 18, the price difference between Shanghai and Tianjin reached RMB 250/mt, while the price in Tianjin was the lowest among all regions. Meanwhile, the average price of 16 mm Q235 B in Shanghai, Tianjin and Lecong was down RMB 387/mt ($48), and that of 16 mm Q345 B was down RMB 395/mt ($49) week on week. The price gap may lead northern product supply to flow into Shanghai market, or the trade volume to increase in the northern market, because even after adding the total costs including the freight, the price still remains lower than that in Shanghai. However, such an action is risky because the prices in Shanghai now have a large margin to drop. The prices in Shanghai may decline as fast as RMB 50-100/mt a day, which would cause to a loss considering the long transportation time from Tianjin to Shanghai and the low trade volume. Sources reported that the current demand of end-users is steadily going down. Due to the shrunk trading volume among the traders in the market, the gap between the deal price of end-users and the market price has narrowed down. On the inventory side, there is an evident supply growth in all regions. Traders indicated that, the centralized delivery rather than the earlier cargo by cargo consignment of the steel mills, and bearish commercial activity resulted in the rapid inventory growth. On the imports and exports side, the rapid decline in domestic prices caused foreign traders to lower the prices they are willing to pay for their imports from China. A few days ago, Baosteel reached an agreement on the shipbuilding plate shipments for the third quarter with most South Korean shipbuilding factories except Hyundai Heavy Industries. Without disclosure of details from Baosteel, the price is thought to be around $620/mt CFR. The market trend may soften next week. Even a temporary rebound may be observed in Tianjin, while the prices may continue decreasing in Shanghai and Lecong.