Rebar may rebound, others not before national holiday

Rebar may rebound, others not before national holiday

China's major steel mills are expected to announce this week their sales policies for October. The announcements will generally be in terms of more price cuts due to slow activity in the domestic market and weak market confidence. Furthermore, a decrease in billet prices –meaning lower production costs – will also be reflected as a reduction to the steel mills' ex-factory prices. Construction steel producers of China are barely breaking even. Last week, rebar prices declined RMB 30-70/ton in China, while wire rod prices were down RMB 20-40/ton. However, hope for strengthening might be in sight as end users have begun to increase their purchases in order to stock up before next week's national holiday. Rebar and wire rod prices have already begun the week with slight increases in Beijing and Shanghai. However, Typhoon Damrey will likely have a negative effect on the Guangzhou construction steel market. China's flat steel markets are dimmer than the construction steel markets. Medium plate stocks continue to increase as prices fall. The fact that four new medium plate production lines are expected to come on stream by the end of the year will only compound the problem. The decrease in demand for medium plate is mostly because end users have shown a preference towards hot rolled sheet/coil. However, the prices of hot rolled and cold rolled sheet/coil products have also been falling in most markets, except western China. There is stiff competition among flat steelmakers in the domestic market. Even galvanized steel prices have been in a decreasing trend as of late despite the rebound in the international flat steel markets. Finally, China's steel product imports exceeded exports by 1 million tons in August, marking the second consecutive month that China has been a net steel importer. The addition of the imports to China's rapidly expanding production capacity puts that much more pressure on China's local markets.