During the past week China's domestic HDG prices continued their downward trend as we predicted in our last report. For example, the price of SGCC 1.0 mm x 1,250 mm x C material produced by Angang fell to RMB 4,050/mt, down from RMB 4,100/mt on Thursday last week.
Due to high inventories and weak demand, most of China's spot steel prices, including HDG prices, continued to decrease this week despite some exceptions such as HR. The HR price fluctuated up and down this week indicating that the bottom of the fluctuating decline trend may be approaching. As the weather gets warmer, demand is also showing an improvement compared with the last two months. Thus, although inventories are still at high levels, the improved transaction situation means that prices are more stable than in the past. Traders who have high inventories are still worried about the losses they may incur if they reduce their inventories by offering lower prices; however, other traders without much inventory are thinking about purchasing new products in preparation for a possible price jump at a later stage. Currently, not everyone is bearish about the short-term prospects for the market.
As for the export and import markets for HDG, the latest Chinese customs data indicate that exports of galvanized plates and strips in January 2009 amounted to 101,581.783 mt, down 44.35 percent month on month. Meanwhile, imports reached 202,301.504 mt, down 10.3 percent down from the previous month. The Chinese government is now considering an increase of the export rebate rate in order to stimulate exports. We still need to wait and see if this policy will actually be implemented.
Based on the situation observed this week, on the back of the improved demand levels the downward trend of the HDG market will likely be delayed in the next few weeks. At the very least, the speed of downward movement will be reduced. In this context, next week domestic HDG prices are likely to decrease just slightly while fluctuating within certain limits.