Chinese HDG market drops slightly due to weak demand and interest rate hike

During the past week the Chinese hot dip galvanized (HDG) market has recorded a slight drop in a context of weak demand and an increase in domestic interest rates.

In the Shanghai market on October 21, the price of SGCC 1.0 mm x 1,250 mm x C HDG was at RMB 5,350/mt ($803/mt). The same product was sold on this date at RMB 5,580/mt ($838mt) in the Guangzhou market and at RMB 5,360/mt ($805/mt) in the Boxing market. Meanwhile, also on October 21, prices of SGCC 0.5 mm x 1,000 mm x C HDG were at RMB 5,550/mt ($833/mt) in the Shanghai market, RMB 5,650/mt ($848/mt) in Guangzhou and RMB 5,550/mt ($833/mt) in the Boxing market. The above prices include 17 percent VAT (US$1 = RMB 6.66).

After the Chinese central bank on October 19 announced its decision to increase interest rates by 0.25 percent effective as of October 20, traders in the domestic HDG market started to sell products at lower prices in order to increase their sales volumes and bring in cash. As a result, market prices dropped; however, the transaction situation did not register any great improvement. Traders and end-users are currently maintaining a wait-and-see approach to purchase activity.

In the past week the HDG market in Boxing was influenced by an inspection by the local tax bureau, during which sales of stocks were frozen. Traders had to pay extra tax in order to buy supplies, thereby resulting in increased costs of material. In this context, supplies in the Boxing market were low and cost more; however, influenced by general market pessimism, local HDG prices declined slightly.

Summing up, the interest rate increase in China has caused HDG market prices to drop; however, the impact of the interest rate hike will gradually weaken. For the coming week, HDG market prices are expected to register just a slight downward adjustment.