SteelOrbis Shanghai
The sudden export expansion by the mills has reduced supply and decreased inventory of rebars and
wire rods in the domestic market, and in turn this has been the major contributing factor to the stable movement of the
wire rod price and to the slight rebound in
rebar price.
On November 3, the average price of 20 mm diameter HRB335
rebar in
China's three major markets - Shanghai, Beijing and Guangzhou - was up RMB 20/mt ($3) week on week at RMB 3,103/mt ($394), while that of 20 mm diameter HRB400
rebar was up RMB 23/mt ($3) at RMB 3,250/mt ($413). The average price of 6.5 mm Q235 high speed
wire rod was unchanged at RMB 3,183/mt ($404).
Rumors indicating that the Chinese government may continue to lower the export rebate rate have inclined the Chinese steel mills and traders of late to rush to export more quantities. Consequently, the long product supply decreased in the domestic market. In particular, in eastern
China, there has been almost no inflow from other regions due to the low local prices, and so the market has seen a sharp inventory decline.
At the beginning of week 44, the market remained stable in eastern
China. Then in the middle of the week,
Shagang announced its ex-factory price list for early-November, according to which long products retained their late-October levels. Since
Shagang's ex-factory prices are higher than the market prices, its agents had to hike their quotations. Due to support from the overall low inventory in this market, the prices climbed upwards.
Meanwhile, the market in southern
China showed a trend of steady movement. Since Shaoguan Steel, Guangzhou Steel and the other leading mills did not supply much to the market, overall inventory remained at a low level, leading to sustainable market quotations.
In northern
China, market prices climbed slightly. The prices of long products in the Beijing market increased RMB 10/mt ($1) week on week.
However, in the northeastern region, under seasonal influences the market demand is gradually shrinking with a trend of slight and continuous decline being observed in prices.
Overall, Chinese
rebar prices went steadily up throughout week 44, while
wire rod prices remained stable with a weak tendency.
According to the current situation, long products prices are still likely to see a slight rebound if the market inventory does not see an upturn during the coming week. Nevertheless, if the sudden expansion in steel exports results in a sharp exports rise for October and November, this may force the Chinese government to quickly announce its schedule for export rebate adjustment, and this would be expected to have a serious negative impact on exports after December.
At the same time, the following two factors may also have some negative impact on the market price;
Firstly, the new tariff policy effective as of November 1 has already had direct impact on the domestic
semis market. At the end of week 44,
billet saw a considerable price decrease in northern and eastern
China and in some other regions, which may also affect long steel prices.
Secondly, with the incipient winter and concomitant low temperatures, the market has shown weak movement in the northeastern and northwestern regions. In the coming period, there will be a great increase in supplies flowing to the southern regions, creating some pressure on the eastern and southern Chinese markets.
In addition, on Nov.3 the People's Bank of
China announced an increase of half a percentage point in the RMB deposit reserve rate for deposit-taking financial institutions, thus indicating that the Chinese government intends to further rein in liquidity and strengthen macro-controls. In the current situation, this policy will not have a direct impact on the steel market, but its potential effect will make it impossible for steel prices to see any big rebound in the short term.