‘Wait-and-see’ for long market after CISA meeting

‘Wait-and-see’ for long market after CISA meeting

The buildup to China Iron and Steel Association’s (CISA) October 21 meeting about stabilizing China’s steel market brought a brief respite from the long product price decline. In anticipation of the meeting, some traders in the Shanghai market increased towards the end of the week their price quotations by a large amount. The actual market prices also followed suit, making up ground lost earlier in the week. The transaction volume slightly increased and inventories saw minor reductions over the course of the week. The smaller range of price declines over the past week was due to the “wait-and-see” attitudes of market players towards the CISA meeting. Compared to the closing price of the previous Friday, average prices in the major markets on October 21 were as follows: 20mm HRB335 rebar had slid RMB44/ton to RMB 2’953/ton ($364); 20mm HRB400 rebar was down RMB47/ton to RMB 3’113/ton ($384); 6.5mm Q235 high-speed wire rod had slipped RMB 56/ton to RMB 3’017/ton ($372). The following measures suggested by CISA on October 21 are related to construction steel: 1. Sticking to reasonable prices and profit margins. This involves guaranteeing profit margins for long products and curbing substandard projects. 2. Canceling steelmakers’ post-transaction kickbacks to traders. 3. Instead of simply offering extremely low prices, China needs to take the export situation in other countries into consideration. Traders point out that it is not easy to take coherent measures, as the measures suggested by CISA conflict with their own benefits when doing business. Thus, it can be said that the CISA meeting will not have a substantial effect on either stopping the price drop or driving up the prices in the short term. Based on its price adjustment in mid-October, Shagang, which has a great influence on markets in eastern China, announced on October 21 its pricing policy for the remainder of the month. It reduced its rebar price (including tax) by RMB 90/ton and wire rod price by RMB 30/ton. In Beijing, some leading traders stated that they would not place orders if steelmakers did not provide them kickbacks for products ordered previously. Such a move does not help to stop the price decline as it could force steelmakers to further reduce their ex-factory prices. Many small-scale steel mills in northern China are either cutting their output or suspending their production. It is unlikely that a large, continuous price drop will be seen. China’s construction steel price will likely show slight fluctuations in the upcoming weeks due to oversupply. SteelOrbis Shanghai