China’s PPGI market rises slightly, caught between high costs and weak demand

Over the past week PPGI prices in China have stepped up by a small margin in a context of relatively weak market demand. Despite the obvious increase in costs of upstream materials, it is still quite difficult for PPGI prices to post upward movement.

In the Boxing market, with almost no orders received in recent days, many PPGI producers have had to halt their operations against the background of relatively high prices of hot rolled coils and full hard coils, thus leading to weakness of both supply and demand in Boxing. The same situation has also been seen in other regions following the shrinkage of PPGI supplies from privately-owned processors. Although the prices of hot rolled materials have reached high levels, PPGI prices have not followed this upward trend, thereby forcing producers to suspend their production operations and to wait for further developments in the market. If there is no reduction in upstream costs and no recovery in downstream demand, then the local PPGI market may continue its stagnant performance over a relatively long period of time, unless the hot rolled market shows a sharp fall or PPGI prices soar dramatically.

At present, sales in some northern regions are beginning to register certain improvements. Previously some PPGI plants had collapsed under the weight of severe snowfalls in the north; with these plants now having been repaired and renovated, an increase in demand for PPGI products has been seen.

On December 10, Chinese steel giant Baosteel announced its ex-factory prices for flat steel products for the month of January 2010. Hot rolled prices have increased by RMB 300/mt ($44/mt), with discounts of RMB 200/mt ($29/mt) being canceled. Cold rolled prices have gone up by RMB 550/mt ($81/mt); while prices of hot rolled pickled products have jumped up by RMB 400/mt ($59/mt), with prices of hot dip galvanized coils up by RMB 400/mt ($59/mt) and color coated coils up by RMB 300/mt ($44/mt). These upward adjustments send signals that the finished steel market is not likely to see any big slump in the short term.

In addition, on December 11, Hubei Province-based Chinese steelmaker Wuhan Iron and Steel Corporation (WISCO) raised its ex-factory prices of hot rolled coil, cold rolled coil and galvanized coil for January delivery by RMB 200/mt ($29/mt), RMB 300/mt ($44/mt) and RMB 300/mt ($44/mt) respectively, compared to December levels. Meanwhile, the producer kept its prices for medium plate, electrolytic tinning coil and color coated unchanged.