China’s longs market continues to fluctuate

Over the past week China's domestic long products market has retained its fluctuating trend, with a minor slide observed in market prices in most regions and a small climb in some individual markets.

Affected by poor market demand, longs prices in the eastern China market posted an overall declining trend in the past week, which was also caused by the decrease in the steel futures market in the first half of the week. Nevertheless, given the support of high cost levels, the market has not fallen sharply. By the end of December 10, rebar inventory in Shanghai reached 460,000 mt, neutral week on week; meanwhile, wire rod inventory in Shanghai stood at 98,000 mt, up by 5,000 mt week on week.

Driven by the Shanghai market as well as by the decrease in the steel futures market, long product prices in the south registered a minor decline on the whole during the first half of the week; subsequently, however, the market began to see a certain improvement following the recovery of the steel futures market.

As regards the northern China market, longs prices moved down by a small margin over the past week. By the end of December 10, rebar inventory in Beijing totaled 315,000 mt, while wire rod inventory amounted to 64,000 mt, up by 6,000 mt week on week.

On the raw materials side, the domestic pig iron market climbed up before entering a stable trend, accompanied by a decline in the trading volume; meanwhile, the scrap market moved steadily down; finally, mainstream quotations in the Chinese billet market have retained their general stability, with prices in some individual regions down by RMB 20-50/mt ($3-7/mt).

Generally speaking, China's rebar exports have been characterized by a general stagnancy in the past week. As a result of the price ascension in the domestic market, prices of Chinese rebar have become too high for overseas customers to accept. With regard to wire rod, the recent export performance has been quite good. At present, Chinese wire rod is now offered around $500-510/mt FOB for the export market, and some low-end prices are at $490/mt FOB, with the main export destinations including Thailand, South Korea and Vietnam.

Overall, due to sluggish market demand, domestic longs prices still face difficulties in terms of registering further movement, though any decrease margin will be limited due to the support of high costs. In addition, Chinese steel giant Baosteel announced considerable upward adjustments to its ex-factory prices for flat steel products for the month of January 2010, which is expected to exert a significant positive impact on the domestic market. In this overall context, it is thought that the Chinese longs market will remain on its fluctuating trend in the coming week.