China's flats market may recover in October

China’s flats market may recover in October

Medium plate and hot rolled sheet/coil prices, which saw large drops in September, continued to fall today (October 10), the first day of trading since last week's National Holiday. The average price of 20 mm medium plate dropped around RMB 500/ton ($62) to RMB 3'100-3'350/ton ($482-413) during September, while the price of 5.5 mm hot rolled coil fell around RMB 400/ton ($49) to RMB 3'180-3'430/ton ($392-423). Other specifications showed similar ranges of decrease. The anemic market is the scapegoat for the continuous increase in steel mills' inventory and the fall in prices so far. Yet, a recovery is expected in China's domestic flat steel prices in October. Medium plate prices have begun increasing in Europe and America, which is welcome news to Chinese medium plate producers who can barely break even with current prices. Current prices are generally accepted as reasonable by medium plate consumers in China, meaning there is some wiggle room. Furthermore, China's eleventh five-year development plan calls for enlarging investment and rapidly strengthening competitiveness. The investment strength and speed of industrial development during the eleventh five-year plan will not be weaker than that of the tenth five-year plan. Therefore, the demand for steel products will certainly increase to some degree. One other important factor is that Beijing has recently eased bank loan restrictions. Working against the recovery of flat prices is the fact that there will be some capacity increases; however, these increases are not expected to be so high. Also, the recent declines in billet and slab prices could also spoil a potential recovery. Therefore, although the prices are expected to recover in October, the range of the recovery may not be very high.