Several negative factors to force steel price down in H2

In 2006, China's steel market experienced serious ups and downs in terms of prices. Before the middle of June, overall prices kept increasing. Then, market prices started to slide down. It is estimated that the market will continue to go down in the next half year. From late June, CRC, HRC, medium plate and construction steel prices began to depreciate with big margin. In the beginning of last week in June, the prices of CRC and HRC decreased by RMB 90-170 ($11-21) per ton in average week on week, and the price of high speed wire rod decreased by RMB 170-200 ($21-25) per ton. On Shanghai market; the prices of HRC and CRC decreased RMB 80-170 ($10-21) per ton while that of medium plate went down RMB 200-250 ($25-31) per ton. The main reason that caused huge fluctuations in recent period was the disorder of market prices. Due to the booming market in the first half, some mills raised their ex-factory prices as impulses for several times and this weakened the market's endurance. As a result, traders even began to get trapped in loss. Even so, some steelmakers remained increasing their ex-factory price with purposes of keeping the market price on a high level. In the meantime, for normal sales, they promised to assist the traders by offering them price subsidy. Such actions directly led to the disorder of market prices. Namely, the relation of market price and ex-factory price is upside down: ex-factory price is higher than the market price. Currently, such a situation is serious, and some steel products' ex-factory price is higher than the market price even by RMB 400 per ton. Due to prices' continuous rise in the first half year, market demand has been restrained. End users' average inventory level has been adjusted lower. A new purchasing mode appeared that is how much (steel) you need, how much (steel) you buy. Many traders are stuffed with worries and don't want to order more. The balance relation of supply and demand on market is getting brittle. In the next half year, it is hard for the steelmakers to purposely raise their ex-factory prices as they did before. On the contrary, several negative factors will perhaps urge steel price to go down. Among these factors, firstly, state has made its mind to control the over heated investment. It is rational to forecast that the demand caused by investment on fixed assets will decrease. Secondly, due to state's strict management on new real estate projects, many construction companies have delayed their operations and also their construction steel purchases. Lastly, influenced by the upcoming policy on the reduction of steel export rebate, and increasing number of antidumping investigations against Chinese steel, local steel market is suffering from more pressure.