Chinese flats market shows steady upward tendency

SteelOrbis Shanghai After the Spring Festival various leading mills made upward adjustments to their flats prices, providing some support for a future market price rise. Since demand did not recover over the past week, the performance of the hot rolled market was on the weak side while cold rolled performed comparatively well. Finally, there was a continuous increase in market inventory over the holiday period for both product types. Looking at the average market prices on March 5, the average price quotation of 5.75 mm x 1,500 mm x C SS400 in Tianjin, Shanghai and Lecong has risen RMB 53/mt ($7/mt) to RMB 4,153/mt ($537/mt), while that of 2.75 mm x 1,250 mm x C Q235B was up RMB 10/mt ($1/mt) to RMB 4,377/mt ($566/mt). Meanwhile, the average price of 1.0 mm x 1,250 mm x 2,500 mm ST12 has risen RMB 76/mt ($10/mt) to RMB 5,103/mt ($659/mt), while that of 1.0 mm x 1,250 x C ST12 was up RMB 57/mt ($7) to RMB 5,067/mt ($655/mt). As regards hot rolled products, influenced by the increased ex-factory prices of the leading domestic mills, prices climbed up in Tianjin and Lecong. Meanwhile, the Shanghai market saw a weak performance, because some traders, pessimistic about the future, kept making sales at low price levels, thus preventing any climb up in prices. According to the information received, affected by the continuing rumors of an imminent export rebate adjustment, traders were in a pessimistic mood, resulting in limited commercial activity between traders. Therefore, the market looks sluggish for the moment despite significant purchases on the the part of end-users. Furthermore, low inventory costs (due to lower inventory levels, especially compared to last year) and big profit margins are also major factors behind the low-price trading performance. The traders have already been able to make a good profit, although their price is lower than the mainstream market level at present. However, due to the increased ex-factory prices, the costs of future supplies will gradually move up. Once the market runs out of the low-priced supplies, the market prices will surely follow an upward trend. Due to the recovering international flats market, the export quotation of Chinese hot rolled products is rising continuously, currently standing at $530-540/mt FOB, up about $10/mt compared with the pre-festival period. With regard to cold rolled, general stability was seen in the market. After Baosteel's sharp increase in CR ex-factory prices, a slight rise continued in the Shanghai market. Meanwhile, Tianjin and Lecong were stable after a previous considerable price rise. The most decisive factor for the flat rolled price trend will be the changes in inventory over the coming week. Market inventory saw a sharp jump over the Spring Festival period (generally a total of three weeks in terms of the effect it has on the market), and it will take time for this accumulated inventory to be consumed. If the market succeeds in digesting this inventory quickly, it will be easier for the market to see a quick rise. On the other hand, if the inventory is not consumed by the end of next week and instead continues to rise, then it will be difficult to see price hikes in the short run. However, according to the present economic growth and demand in both the international and domestic markets, the overall trend for the market is up.