Chinese medium plate producers face unprecedented pressure

China's domestic market medium plate prices again posted a decrease in the past week, as a result of which mills' ex-factory prices are now higher than market price levels. In this context, mills have started to come under strong pressure as distributors reduce their orders.

The current medium plate market is experiencing difficult times both domestically and overseas. The prospects are poor for Chinese medium plate exports; export quotations have already dropped down to $500/mt FOB, i.e. below domestic market levels. As regards the domestic market, certain plate supplies that used to be produced for the export market or stocked up by the mills have entered the market at RMB 200-300/mt ($29-44/mt) below the market price levels. Such low-priced materials generally come from first tier mills, like Baosteel, Shagang, Nanjing Steel, and others. At present, Baosteel and Shagang are offering these materials to the market at only RMB 3,000/mt ($439/mt), thus exerting a strong negative influence on the current market level of RMB 3,400/mt ($498/mt).

Against the background of the sluggish market performance, distributors have placed very few orders with the mills, as they aim to reduce their exposure to risk. Due to both the reduction in the volume of orders and the slack export market, the mills find themselves coming under increased pressure. Some mills are producing only to fill the orders they have already received, while others have decided in favor of further production cutbacks.

Meanwhile, the recession in the downstream industry has also affected the shipbuilding plate market, in which prices have been declining steadily in recent days. Many shipbuilding enterprises in the provinces of Jiangsu and Zhejiang, which used to make small- and medium-sized vessels, have gone bankrupt, leading to a remarkable shrinkage in demand for shipbuilding plate. In the past, the major export destination for Chinese shipbuilding plate was South Korea; however, due to the current economic slowdown in South Korea, the situation of China's shipbuilding plate exports has become quite depressed. At present, export offers of domestic shipbuilding plate stand at around $560/mt FOB, equivalent to domestic market levels.

China's medium plate exports in January came to 302,300 mt, down 437,300 mt or 59.13 percent year on year, totaling $322 million in value, down $245 million or 43.18 percent compared with the same month last year. The average medium plate export price in January was $1,066.27/mt.

Medium plate imports in January stood at 79,300 mt, down 5,400 mt or 6.33 percent year on year, totaling $161 million, up $43 million or 36.55 percent compared with the same month last year. The average import price was $2,029.95/mt.