Sharp decrease in Chinese hot rolled prices

SteelOrbis Shanghai Driven by an atmosphere of panic, Chinese flat rolled prices moved down sharply over the past week, with no changes in hot rolled inventory and just a slight rise in cold rolled inventory. On October 23, the average price quotation of 5.75 mm x 1,500 mm x C SS400 hot rolled coil in Tianjin, Shanghai and Lecong was down RMB 127/mt ($16) week on week at RMB 3,733/mt ($473), while that of 2.75 mm x 1,250 mm x C Q235B hot rolled coil was down RMB 97/mt ($12) at RMB 4,033/mt ($511). The average price of 1.0 mm x 1,250 mm x 2,500 mm ST12 was down RMB 64/mt ($8) at RMB 4,813/mt ($610), while that of 1.0 mm x 1,250 mm x C ST12 was down RMB 57/mt ($7) at RMB 4,713/mt ($ 597). As regards hot rolled, the long-standing sluggish demand impaired the confidence of traders in the Shanghai market. Over the past week, the Shanghai market saw a sharp drop in hot rolled prices, which introduced an atmosphere of panic into the market. In the afternoon of Friday (October 20), the mainstream price in the market was RMB 3,680/mt ($466), down RMB 220/mt ($28) compared with RMB 3,900/mt ($494) on October 12, the highest price level. Affected by the Shanghai market, all the local markets around China saw decreases at different levels. The rapid drop in the market within such a short period of time was mainly caused by a feeling of panic. The slight decline in total inventory indicates that demand has not shrunk remarkably. Since the steel mills have not lowered their ex-factory prices, the costs of traders are quite high. Therefore, hot rolled sheet will rebound during the coming week. However, with the strengthening macro-controls and the weak international market trend, the hot rolled price is in a downward trend on the whole. As regards the cold rolled market, under the influence of the hot rolled market, there was a considerable decrease over the past week. Despite a slight increase in inventory, the overall inventory is still at the normal level. In October, Baosteel, Benxi Steel, Wuhan Steel, Maanshan Steel and some other mills plan to overhaul their cold rolling production lines, thus domestic cold rolled supply is not going to increase. In the short term, the market is likely to maintain its supply and demand balance.