Sharp price increase for Chinese flat rolled prices

SteelOrbis Shanghai After May Day week, Chinese hot rolled coil inventory fell down while the market prices increased sharply. However, the business activity has not improved quite much. Cold rolled prices remained unchanged in general. The HRC inventory of major warehouses in Shanghai was at 420,000 metric tons on May 12, down 20,000 metric tons compared to the end of April. The product availability is tight in Tianjin market after the holiday. Therefore, the prices in Tianjin and Shanghai have gone up sharply since Monday, May 8 with the opening of the markets after the holiday, which also drove up Lecong market. In addition to the decrease in market inventory, steel mills have begun selling their products according to new price lists, which has lifted traders' cost. Hot rolled coil prices increased around RMB 150/mt since the opening after the holiday. The market players in northern regions such as Tianjin are the main initiators of the price hikes after the holidays. But the commercial activity has not recovered in line with the increase. The price of cold rolled products slightly went up, but the sluggish trade failed to support the price increase. On the export side, China exported 2.7 million metric tons of finished steel in April according to the statistics from the Customs, up 30.5 percent from a year earlier, and down 3.9 percent month on month. Sources reported that the export tax rebate will decrease to 5 percent from the current 11 percent by the end of May. The production tasks of major domestic HRC mills continue to be tight, but not as tight as that before the holiday. Except Anshan Steel, Baosteel and Wuhan Steel, some mills have begun considering to accept new orders. Traders' became cautious after the price bounced back, because the availability of products is currently tight, while the demand is not strong enough to bolster them. The shortage in supply is an important factor that supports the prices. The vivid gap between the price levels acceptable by the consumers in the market and the ex-factory prices fails to keep the price increase steady. The strong international market condition and the upcoming export tax rebate policy will have some impact on the market. To sum up, flat product prices are expected to remain stable; only slight fluctuations may be observed.