Chinese HR and CR markets fluctuate

SteelOrbis Shanghai Uncertainties in local HR and CR markets of China are expanding, as Chinese government is expected to strengthen the macro-control on economy further. The rein in excessive growth of fixed asset investment and lending was urged by State Council on June 14. Besides, the hike of deposit reserve rate announced by Central Bank, and the strict examination on land projects demanded by National Development and Reform Commission and Ministry of Land and Resources all demonstrated the increased strength of macro-control recently. Continuing to small amount of commercial activities in the previous week in HR market, new resource supplies of some leading steel mills to major markets led to a slight increase of market inventory. In addition, the prices had increased too quickly in the previous weeks; therefore, prices are requiring an adjustment now. However, manipulation still occurs in the course of price decrease, especially for Shanghai market with considerable decrease range. On June 13, Shanghai market even saw panic reduction, with the daily price down about RMB 100/mt, which is quite scare in such a strong HR market for this year. Cold rolled prices are less responsive to the changes in the market than those of hot rolled products. The export tax rebate policy is still expected with a high interest from the market. Meanwhile, steel mills and traders have become even more sensitive to the international market. Price increases have slowed down as the inventory increased both in the US and Europe. Domestic steel mills and traders attach much importance to the change in future international market and the mutual influences between it and domestic export tax rebate. The domestic traders are quite cautious with the current market. On one side, the high prices of the domestic steel mills will continue to support the price bottom line of traders. On the other side, the expectation of an increase in domestic resources and light commercial activities make it hard for prices to go up considerably. Even Baosteel's decision to keep hot rolled product prices unchanged for July caused domestic traders to lower their prices further. Domestic hot and cold rolled steel market prices are expected to drop for a certain degree, but the range of the decrease is not expected to be large, because of high ex-factory price increases by the steel mills.