Rebar prices soaring in southern China

SteelOrbis Shanghai Influenced by low supply levels, rebar prices soared in southern China over the past week. Meanwhile, slight fluctuations were seen in eastern China, while there was a continuous decrease in the northern regions. Although there has been no remarkable change overall across the entire market, prices differed from region to region with the price gap continuing to grow. On December 15, the average price of 20 mm diameter HRB 335 rebar in the three major Chinese markets - Shanghai, Beijing and Guangzhou - was up RMB 30/mt ($4) to RMB 3,117/mt ($399/mt), while that of 20 mm diameter HRB 400 rebar was up RMB 7/mt ($1/mt) to RMB 3,277/mt ($420/mt). Meanwhile, the average price of 6.5 mm Q235 high speed wire rod was down RMB 4 ($1/mt) to RMB 3,163/mt ($405/mt). In southeastern Guangzhou city, the market did not see many new arrivals from the northern mills, while there were some problems with the production lines of local mills. Meanwhile, Shaoguan Steel began to overhaul its rebar production line recently. Under the influence of these factors, rebar prices jumped up sharply in Guangzhou, followed by the neighboring markets. The Shanghai market moved steadily on the whole, showing a slight increase. Pessimistic about the future, traders are not active in placing orders. The market inventory thus continued to circle at a low level and provide ongoing support for prices. The market remained in a downward trend in Beijing. Throughout the past week, the leading traders began to sell at low prices because of capital-related pressure. The continuous decrease in the Beijing market may not alter local demand, but it can effectively prevent inflows from other regions. The long products inventory has been fluctuating at a low level for almost three weeks now. Insufficient levels of available transport are still the major reason for the expanding price gap between the northern and southern Chinese regions. At present, the price difference in HRB335 rebar from Tangshan Steel between Beijing and Guangzhou has reached RMB 500/mt ($64/mt), whereas the transportation fee involved is only RMB 200/mt ($26/mt). Once the transportation problems have been resolved, a decrease in the southern market is inevitable. The latest data released from China's State Bureau of Statistics show that the country's urban fixed assets investments for Jan-Nov totaled RMB 7.9312 trillion ($1.0155 trillion), up 26.6 percent compared with the same period last year. This growth is 0.2 percentage points lower than that for the Jan-Oct period, representing a decline in growth. Rebar production in November totaled 7.28 million mt, up 14.2 percent year on year, and 1.6 percentage points lower compared with growth in October. Wire rod production totaled 6.12 million mt, up 14.5 percent year on year and down 3.5 percentage points in growth month on month. As regards the import and export situation, due to the changes in China's export VAT refund rate, the quotation of rebar shipped in January is at $415/mt, up $30/mt or so compared with the current ones. However, this price is only $10/mt higher than the quotation of semi finished steel, which shows that China's long products are still very competitive in Southeast Asia. All in all, the decline in fixed assets investment growth and other seasonal factors will inevitable lead to a decrease in long products prices in the coming days. However, since production growth is also falling and exports are not affected at present, prices are unlikely to see a sharp drop in the short term.