China’s domestic PPGI prices still on the way down

During the past week China’s domestic pre-painted galvanized iron prices continued their downward trend as we predicted in our last report. For example, the price of CGCC 0.476 mm x 1,000 mm x C material produced by Wuxi NewDaZhong has now dropped to RMB 5,300/mt, down from RMB 5,450/mt last Friday. Although the transaction situation for HDG has shown some improvement this week due to stronger demand, the PPGI transaction situation still seems not to have made any obvious progress. At the current juncture, some downstream purchasers of PPGI such as certain privately-owned factories are not interested so much in quality, but rather pay more attention to obtaining low prices. As for the purchasers who value quality, they are still showing caution as regards purchase quantities. The result is that at the present time low-priced PPGI of poorer quality, expecially material produced by private sector mini-mills, may experience a better deal situation than the higher quality PPGI produced by state-owned mills. In addition, traders with higher-priced inventories from the state-owned mills are obliged to lower their prices if they want to raise their sales volumes. Overall in China’s current PPGI market inventories are still at high levels while demand is low, and concerns are expressed about the likely price trend in the future. As for the import and export markets for PPGI, the latest Chinese customs data indicate that exports of pre-painted coils and strips in January 2009 amounted to 112,534.479 mt, down 56.89 percent month on month. Meanwhile, imports reached 22,356.892 mt, down 11.18 percent down from the previous month. China’s Ministry of Finance has been urged by the China Iron and Steel Association (CISA) to raise the export rebate rate on steel products. According to the CISA proposal, steel products with a current five percent export rebate rate would see a rise to a 17 percent rebate. In addition, for products for which there is currently no export rebate, such as hot rolled, an export rebate of 13 percent would be implemented. Based on the situation observed this week, with inventories at high levels and demand weak, China’s domestic PPGI prices are likely to continue to drop during the coming seven days and the deal situation is expected to remain weak.