China's flat rolled market ready to go up

SteelOrbis Shanghai Chinese flat rolled prices showed stable movement throughout the past week, while some fluctuations were seen in various regional markets. Market inventory saw a slight increase, but remains nevertheless at a relatively low level. On January 22, the average price quotation of 5.75 mm x 1,500 mm x C SS400 in Tianjin, Shanghai and Lecong was down RMB 23/mt ($3/ mt) to RMB 3,970/mt ($510/mt), while that of 2.75 mm x 1,250 mm x C Q235B was down RMB 7/mt ($1/mt) to RMB 4,233/mt ($544/mt). Meanwhile, the average price of 1.0 mm x 1,250 mm x 2,500 mm ST12 decreased RMB 10/mt ($1/mt) to RMB 5,023/mt ($646/mt), while that of 1.0 mm x 1,250 mm x C ST12 remained unchanged at RMB 5,007/mt ($644/mt). With regards to hot rolled, the major markets saw slight fluctuations last week after having declined during the previous week. The Shanghai market saw an active performance, displaying strong optimistic expectations in relation to the future period. Meanwhile, affected by the low-price supply from Rizhao Steel, the market in Guangzhou fell by a small margin - also due to the increased market inventory level. Finally, due to the frequent arrivals of fresh supplies, the actual deal prices in the Tianjin market declined a little. However, the price barrier of RMB 3,800/mt ($488) was not breached at any time. In spite of the above local market situations, hot rolled prices in Southeast Asia are still in a weak and stable state, and so China's quotations of $480-485/mt FOB have been turned down. On the one hand, for the Chinese mills this quotation is close to their domestic price level, and consequently they are not willing to reduce their prices for exports. If the international market fails to see a rise in the near future, then the price increase in the domestic market will be limited. On the other hand, since the global market is dependent on Chinese steel exports to a certain extent, the domestic price increase will certainly drive up the prices in the world market. Moreover, South Korean POSCO is scheduled to carry out overhauling work on its hot rolled mill, leading to an estimated production shortfall of 300,000 mt, which is bound to give a strong boost to China's market prices. As regards cold rolled, the market continued stable, with just a slight increase being observed in market inventory. Some traders indicated that downstream demand seemed to weaken. Despite the confidence in the market for the period after the Spring Festival (18-25 February), they are thus maintaining a cautious attitude toward the market in the short run. In conclusion, the steady movement of flat rolled throughout the past week has laid a solid foundation for further price increases. Coming up to the end of January, the mills are to release their prices for February. In order to avoid encouraging sharp price rises on the part of the mills, traders are reluctant to take any action that may contribute to pushing up the market prices. Therefore, the market is likely to remain stable for the next week.