China’s long products market first ascends before sliding back down

The Chinese long products market first climbed up during the past week before registering an overall decline. From January 4 to January 7, domestic longs prices in China continued to be boosted by the mills' increased ex-factory prices ; however, starting from January 8, affected by macroeconomic issues and the sharp drop in the steel futures market, long product prices in China's leading markets began to post a decline.

By the end of trading on January 8, market prices of 6.5 mm Q235 high speed wire rod were at RMB 4,000/mt ($587/mt), RMB 3,820/mt ($560/mt) and RMB 4,020/mt ($589/mt) in Shanghai, Beijing and Guangzhou respectively; meanwhile 20 mm HRB 335 rebar prices stood at RMB 3,770/mt ($553/mt), RMB 3,810/mt ($559/mt) and RMB 4,040/mt ($592/mt) in the above respective areas, with 20 mm HRB 400 offered at RMB 3,900/mt ($572/mt), RMB 3,910/mt ($573/mt) and RMB 4,280/mt ($628/mt) respectively.

Over the past week, domestic longs producers continued to make upward adjustments, in the range of RMB 20-100/mt ($3-15/mt), to their ex-factory prices. On January 11, Jiangsu Province-based Shagang issued its ex-factory longs prices for mid-January. This producer's new rebar prices rose by RMB 80/mt ($12/mt) from early January levels, with the price of 14-25 mm diameter HRB 335 now at RMB 3,860/mt ($566/mt); meanwhile, the producer's high speed wire rod prices have increased by RMB 100/mt ($15/mt), with 6.5 mm Q235 now offered at RMB 4,050/mt ($594/mt). All the above prices include 17 percent VAT.

In the past week, while China's central bank reaffirmed that it would maintain a moderately loose monetary policy in 2010, it suddenly decided to raise the interest on three-month bills, generating expectations of tightening capital liquidity in the markets in the future. In this context, the domestic stock market and futures market experienced a general downward movement, which significantly affected market confidence in the spot steel market.

On the raw materials side, still characterized by tight supply, the domestic pig iron market has remained on a rising trend over the past week; meanwhile, scrap prices have retained their positive performance, with certain increases seen in purchase prices for scrap. The domestic billet market stepped up by RMB 100-130/mt ($15-19/mt) in the past week, against a background of slack trading activity.

Overall, the Chinese long products market has continued to be supported by cost factors as a result of the upward adjustments made by various mills to their prices. However, market confidence has undergone a certain change following the abovementioned macroeconomic adjustment, which has made traders take a  more cautious view of the future market. In addition, overall market inventory has still maintained a minor rising trend with increased arrivals of new materials seen in various leading markets. As regards the future, there would appear to be room available for further downward movement in China's long product prices.