SteelOrbis Shanghai
Due to the lower inventory level in
China and strong demand for hot rolled steel products from
China and other countries, especially from Southeast Asian countries, the domestic sales price for hot rolled will arrive at the reasonable level of RMB 4,000/mt ($513/mt) in the near future.
At present,
China's hot rolled coils sales prices are in general increasing faster than previous. The average price for 4.0mm to 11.5mm x1500xc Q235 is close to RMB 3,950/mt ($506/mt) in
China, even though there were still a few price fluctuations in the domestic steel market recently. Quotation prices for hot rolled coils are very confused, with some traders exceeding the average price by RMB 50/mt ($6/mt) to RMB 4,000/mt (513/mt), while others fell below the average price by RMB 20/mt ($3/mt) to RMB 3,930/mt ($503/mt). With traders' attitudes differing regarding the future prices trend for hot rolled coils in
China, some think that the price will go up slightly, others say that it drop sharply.
In addition,
China's steel producers have gradually increased their sales prices domestically and increased their ex-factory prices for foreign countries by $20/mt. For example, Liaoning Province-based Benxi Iron and Steel Group has hiked its ex-mill price to about RMB 3940/mt, effective from Jan.11, 2007. Currently, most key steelmakers' domestic sales prices for hot rolled coil are approaching RMB 3940/mt, export prices are moving up to $475-480/mt FOB for commercial usage, $490-500/mt FOB for re-rolled.
A deal between Chinese producers and Indonesian buyers was concluded at $515/mt CFR recently. Last week, Southeast Asian countries like
Indonesia and
Thailand concluded some transactions for
China-origin narrow hot rolled strips at $430-440/mt CFR, evidence of upward movement. Thus, some narrow hot rollers in
China will try to hike their export prices. Some South Korean steel producers have increased their offers by $20/mt for hot rolled coils. There are seldom transactions in the South Korean steel market as it has not recovered yet. Neighbor
Japan has already suspended its export quotations for hot rolled coils for Q1 2007 shipment because demand surpassed supply by more than that estimated at the end of 2006.
In analyzing the factors principally affecting the hot rolled coil price trend in China, we can say that; generally speaking, there are more positive than negative points.
From the respective of the domestic steel market:
Firstly,
China's steelmakers have gradually increased their ex-factory prices for hot rolled coils, and this has pushed up sales prices slightly. Exporters should increase their prices accordingly as well. With
China's overall economy seeing healthy growth, demand for steel products has been getting stronger and stronger. Lower inventories for various kinds of steel will create an excellent environment for steel price movement in the coming year. Up to
China's Lunar New Year holiday, the low inventory trend will remain unchanged.
Secondly, there are still many orders from foreign buyers in the hands of
China's steel manufacturers at the present time. It is estimated that export steel will keep strong prior to the Lunar New Year, if no big changes are seen in the Chinese Government's export policies.
Thirdly, the growth of
China's steel output is stable, and this is conducive to price stability. The closure of outdated facilities is one of the key issues facing
China's Government in 2007. Once it becomes a reality, inferior commodities should be rare in the market.
Finally,
China's steelmakers have already accepted an
iron ore price hike by 9.5% for the 2007.
From the export market view;
China's finished steel product exports reached their highest-ever monthly level in December 2006 totaling about 5.55 million metric tons,- growth of 205 percent compared with December 2005. The total finished steel export volume for 2006 hit 43.01million metric tons - representing 109.6 percent growth compared with the same period of 2005. Total finished steel imports were about 18.51 million metric tons, down 28.3 percent compared with 2005. Thus, net exports of finished steel were 24.5million metric tons. Such figures have already attracted keen interest from other countries' industries, and may boost possibilities of anti-dumping investigations cases.
Recently, international precision metals and crude oil prices were down sharply. For example, the New York Merchant Exchange-based crude oil prices decreased by $2/barrel to about $51/barrel, which is good news for global economic development. The positive global economic outlook, combined with the factors listed above, seem to indicate a good year for the hot rolled coil market in 2007, with
China sure to be one of the main beneficiaries.