Further decline expected in China’s cold rolled market

Throughout the past week (September 2-9) the Chinese cold rolled market has continued its slackening trend of previous weeks, but with a slighter week-on-week decrease as compared to the week before. As inventory levels are still on the rise, market players expect to see further downward movement in the market in the coming period.

The dramatic price declines seen in China's domestic hot rolled market have also affected the local cold rolled market, bringing great pressure to bear on holders of cold rolled stocks who are thus in a hurry to sell off material. Even for traders not experiencing financial problems, high inventory is still a source of concern and so these traders have also taken part in the destocking process.

In southern China, new arrivals which were previously booked at high prices may result in buyers suffering bigger losses. Market participants feel bewildered when they consider the prospects for the future, and most of them expect further decreases for the coming period. During the week in question, traders differed significantly in their approach to the market: the majority of traders have recently concluded deals at relatively low levels, while others have insisted on keeping their prices at high levels.

On the inventory side, overall levels have maintained a slight uptrend in China's main markets, with the biggest increase seen in eastern China, followed by the north of the country. Census data show that, as of September 3, cold rolled inventory in the Shanghai market amounted to 327,000 mt, up 5,000 approximately as compared with figure on August 27.

On the whole, the continuous price decrease seen in China's hot rolled market has led to a widening of the gap between local prices of hot rolled and cold rolled products. Meanwhile, the imbalance between supply and demand is the fundamental factor behind the ongoing price downtrend in China's cold rolled market.