China’s domestic cold rolled market accelerates its rise

During the week ending June 17, the Chinese domestic cold rolled market registered a greater rise compared to the previous week, mainly on the back of the higher-than-expected increase announced by Shanghai-based steel giant Baosteel in its ex-mill cold rolled product prices for July. Meanwhile, the rising price trend in the domestic hot rolled market as well as the slow supplies of cold rolled materials are providing strong support for the Chinese cold rolled market.

Over the last couple of weeks, China's domestic cold rolled prices have been trending up steadily, though relatively low demand has been observed in the market. Some traders have been actively selling their materials, worrying that the increased prices will start to affect their sales negatively. However, at the same time there are still a few traders who are bullish about the future of the market especially after Baosteel's announcement of its price increase.

During the week in question, cold rolled inventory in China's leading markets continued to decline. According to the relevant statistics, as of June 12 cold rolled inventory in the Shanghai market was 310,000 mt, down 10,000 mt from the previous week.

On the mills' side, on June 11 Baosteel released its new ex-mill prices of certain products for the month of July. Accordingly, the producer's cold rolled coil prices have been raised by RMB 200/mt ($29/mt). Thus, the price of DC01 1.0 mm x 1,250 mm x C now stands at RMB 4,026/mt ($589/mt) ex-mill.

Meanwhile, China's output of cold rolled products in May reached 3.0143 million mt, up 21,000 mt or 0.7 percent year on year while the average daily output in the month in question came to 97,200 mt, up 300 mt or 0.35 percent compared with the April level. During the January-May period, China produced a total of 13.322 million mt of cold rolled products, down 747,900 mt or 5.32 percent year on year. Meanwhile, as for the main cold rolled steel consuming markets in China, in the auto market both output and sales volume in May exceeded 1.1 million units, while the white goods market registered a monthly increase of 36 percent in its sales volume.

In general, since the downstream markets are in a good condition as regards both output and sales volumes, domestic demand for cold rolled products is holding up well. Meanwhile, due to the slow arrival of cold rolled products in China's leading markets, traders have also been slowing down their sales of materials. As a result, there is a good chance that market prices will continue to trend up. However, considering that the price rise in China's cold rolled market has been relatively strong and rapid within such a short time period, it is expected that there will be limited room for further price rises in this market in the coming period.