China’s longs market enters another declining phase

Tuesday, 07 April 2009 11:01:16 (GMT+3)   |  
       

Affected by the sharp slump in iron ore prices, some mills reduced their prices immediately, with the result that Chinese long product prices have entered a downward movement once again. However, improvements have been seen in commercial activity in recent days, contributing to the big decrease in inventory levels.

Product name

Specification

Category

Average price(RMB/mt)

Price($/mt)

Weekly change (RMB/mt)

Rebar

20 mm

HRB 335

3,300

483

-30

Rebar

20 mm

HRB 400

3,460

507

-20

Wire rod

6.5 mm

Q235

3,230

473

-20

At the beginning of this week, the China Iron and Steel Association reached a preliminary price reduction agreement with the global mining giants for a 40 percent cut in iron ore prices, which would also be effective for the settlement of iron ore shipments from January to March this year. Based on such an agreement, the Chinese mills will gain significant relief for losses incurred in the first quarter, and many will even be able to make some profit. It is heard that some international mills are seeking an even bigger decrease, and this is also being welcomed by the Chinese mills. In this context, against the background of still significant market pressure, Shagang, Magang, Rizhao Steel and other mills have taken the lead in lowering their prices, thereby dealing a big blow to the eastern China market, and leading to the rapid drop in market prices in Shanghai and its surrounding areas.

Meanwhile, other regions have faced a similar problem to that seen in Shanghai. Local leading mills have been trying to snatch market shares and stimulate sales performance by means of price cuts, driving the market down into a new declining trend.

However, with the coming of the busy season for construction work, the domestic market has started to show active levels of demand as well as a continuous decline in inventory levels, thus laying the foundation for a future rebound in prices.

On the raw materials side, pig iron prices moved steadily down over the past week on the back of the still lackluster trading performance. In the meantime, the scrap market retained its soft sliding movement, while the billet market maintained a weak stability.

Overall, the Chinese long products market has recorded certain improvements in terms of the supply-and-demand relationship, while, given the sharp slump in iron ore prices and the competitive price reductions made by the mills, the domestic longs market is expected to register a relatively big price drop in the short term.


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