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 dropped to RMB 4,030/mt, down from RMB 4,050/mt on Thursday last week.
Due to the high inventories and low demand, Chinese domestic market HDG prices continued to drop this week. Meanwhile, compared with the last several weeks, local HDG inventories have decreased to some extent. One Shanghai-based trader stated that his HDG inventories decreased by about 15 percent in the space of a single week. Although this trader's inventories remain at high levels, the pressure has been reduced by a certain degree. As for demand, some traders report a rising trend in quantities being purchased. However, the normal seasonal pickup in demand for HDG has not occurred.
As for mills, this week both Ansteel and Bensteel issued their new ex-work prices, with both producers lowering their HDG prices. For example, Ansteel lowered its new HDG ex-works prices by RMB 300/mt ($43/mt), while Bensteel reduced its prices by RMB 450/mt ($65/mt). These prices do not include 17 percent VAT. Meanwhile, it is reported that several major mills are planning to cut production by 20-50 percent, which could cause supplies of steel products in April to register an obvious decrease. Consequently, a halt in the current decrease trend could be expected on the back of improved demand and reduced supply.
Based on the situation observed this week, in the next few weeks prices may start to move on a flatter trend. For the next seven days, however, the domestic HDG market is still expected to remain under the influence of high inventories and low demand.