General softness prevails in China’s medium plate

Still defined by extreme softness in the past week, the medium plate market in China has failed to see any rise ahead of the National Day holiday (October 1-8), with stockpiling purchases by downstream customers proving to be scarce. Meanwhile, given the general anticipation of a remarkable increase in market inventory levels during the post-holiday period, players have been reluctant to make purchases, leading to a limited sales performance and declining price levels in the current market.

In recent days, China's domestic medium plate market has been characterized in particular by cashing-in activities on the part of most traders. In the context of the overall sluggish trading volume, traders have tried to slash their prices so as to stimulate sales. Generally speaking, the root reason for the selling off of materials is the general pessimistic expectation of most players as regards the post-holiday market. It is believed that market inventory will soar considerably during the National Day holiday, thereby steadily driving down market prices. In view of current cost levels, downward room is still available for market prices of materials from first tier mills. Since the ex-factory prices of some mills are almost at the same levels as market prices, some traders prefer to carry out their sourcing activities in the market rather than place orders with the mills.

Faced with an unfavorable market situation, some mills have announced many discounts for their agents, in order to stimulate sales and improve their market share. For instance, Shaoguan Steel has announced relatively low ex-factory prices, leading to the low costs of its materials in the market, thereby helping to drive down the overall market prices. Meanwhile, some second and third tiers mills have continued to reduce their production outputs. Currently, Chunye Steel has halted its operations, Shanggang Steel is producing at 70 percent capacity, Changda Steel is producing at 60 percent capacity, and Xicheng Steel is operating at less than 40 percent capacity. It is expected that there will not be any arrivals of materials from second tier mills in the market during the post-holiday period.

At present, many traders have already left the bearish market in order to go on holiday. As regards the post-holiday period, the Chinese medium plate market is likely to register a further fall.