Still characterized by high inventory, high production and low demand, China's domestic hot rolled market continued to go down on a fluctuating trend over the past week. Looking at the current situation, lofty inventory levels and slack trading performance constitute the greatest obstacles preventing hot rolled prices in China from climbing back up in the near future.
Product name | Specification | Category | Average price(RMB/mt) | Weekly change (RMB/mt) | Price ($/mt) |
HR | 5.75 mm x 1,500 mm | Q235B | 3,563 | -24 | 522 |
HR | 2.75 mm x 1,250 mm | Q235B | 3,700 | -50 | 543 |
During the past week more and more traders have become pessimistic as regards the prospects for the future trend of the domestic hot rolled market. Currently, many traders believe that market prices are very unlikely to see steady growth as the increase rate of market inventory is much higher than that of demand levels. In this context, considering the downward pressure in the present market, players have been quite cautious in their recent market activities.
Following Baosteel's issuance of its October price policy on September 7, Hubei Province-based Chinese steelmaker Wuhan Iron and Steel Corporation (WISCO) also announced its ex-factory prices for October. This producer's Q235 prices have decreased by RMB 300/mt ($44/mt), while its SPHC prices are down by RMB 400/mt ($59/mt). After the change, the price of 2.75 mm Q235 HRC is at RMB 4,300/mt ($630/mt), while that of 5.5 mm Q235 HRC is at RMB 4,240/mt ($622/mt). All the above prices exclude 17 percent VAT and are effective as of September 10, 2009.
On September 8, Rizhao Steel lowered its hot rolled prices by RMB 50/mt ($7/mt), with the new offer price of 4.75 mm Q235 HRC now at RMB 3,450/mt ($506/mt). The above prices include 17 percent VAT.
More recently, on September 14, both Angang and Baotou Steel announced strong downward adjustments to their ex-factory flats prices for October. Angang has cut its hot rolled prices by RMB 450/mt ($66/mt) compared to the levels for September. Thus, the producer's price of 5.5 mm x 1,500 mm Q235 is RMB 3,030/mt ($444/mt), while its price of 5.5 mm x 1,500 mm SPHC is RMB 3,080/mt ($452/mt). Meanwhile, Baotou Steel has slashed its hot rolled prices by RMB 760/mt ($111/mt) from September levels. As a result, this mill's new price of 5.5 mm Q235 is RMB 3,800/mt ($557/mt).
In the past week, hot rolled inventory in China's leading markets has remained on the rise. According to the latest figures, total hot rolled inventory in China stood at 2.08606 million mt, up 1.4438 million mt year on year and up 63,000 mt month on month. Moreover, hot rolled inventory in Shanghai amounted to 952,800 mt on September 10, up 16,000 mt compared with the level on September 4.
According to industry insiders, the high inventory levels in the current hot rolled market constitute the most important obstacle that will prevent market prices from rising in the near future; and the root reason for the high inventory is the blind release of mills' production capacities. According to the statistics, China's hot rolled production in July totaled 10.298 million mt, up 10.1 percent year on year, with a daily output of 332,000 mt, up 0.3 percent month on month. From January to July, total hot rolled production in China reached 63.172 million mt, up 129,000 mt or 0.2 percent year on year.
Overall, given the continuous rise in market inventory as well as the insufficient downstream demand, China's domestic hot rolled market still faces significant downward pressure. It is expected that domestic hot rolled prices in China will continue their fluctuating movement in the coming week.