Over the past week China's domestic section steel market began to slide down, with an obvious drop seen especially in the Tangshan region.
Three principal factors have constributed to the current price fall. First of all, the remarkable decrease in the leading steel product varieties like rebar and HRC in recent days has determined the general direction of the domestic steel market, driving down section steel prices accordingly.
Secondly, billet prices in Tangshan started to show a decline, falling from their previous lofty levels. As this appears to be just the beginning of the downward movement in the billet market, a certain confusion has been recorded over market quotations. In general, billet prices in Tangshan registered a slip of RMB 50/mt ($7/mt) during the weekend before starting to follow a stable trend. Feeling it hard to deal with the current situation, some traders have stopped giving out offers, prefering to wait for the further development of the market. On the billet side, at present the mainstream prices of 150 mm x 150 mm common carbon billet in Tangshan are at RMB 3,360 ($493/mt, tax included), with the tax-excluded prices at RMB 3,260/mt ($478/mt); 165 mm x 165 mm common carbon billet is now offered at RMB 3,390/mt ($497/mt, tax included), while the prices of low-alloy billet stand at RMB 3,480-3,500/mt ($510-531/mt).
Thirdly, the Chinese section steel market has been characterzied by consistently sluggish commercial activity in recent days, with downstream buyers appearing uninterested in making purchases and traders unwilling to buy in stocks. On account of the previous excessive increase in billet prices, some small-scale section steel producers have been forced by the cost factor to halt their production operations. Although the billet market has posted a slide of about RMB 150/mt ($22/mt) week on week, producers still have to face escalating capital pressure as the Chinese New Year holiday (February 14-21) approaches. Furthermore, given the bearish trading performance, section steel producers have only received few orders in spite of the reduced prices of billet.
Due to the general anticipation that the market is unlikely to climb up during the pre-holiday period, many players have withdrawn from the market and are maintaining a wait-and-see stance for the time being. It is generally believed that the market will see a release of demand after the Chinese New Year holiday, thereby providing support for price levels.