Chinese long products market remains stable in general

Over the past week the Chinese construction steel market first registered a minor reduction before seeing an overall climb in the second half of the week. While a mixed performance was observed in the various regions, general market prices at the end of the week did not differ greatly from those at the start of the week. Meanwhile, the overall trading volume in China's domestic longs market has decreased, accompanied an increase in inventory levels.

During the first half of the past week, China's domestic longs market observed a sluggish trading performance due to low demand from end-side buyers, thereby resulting in a minor reduction in market prices. Nevertheless, coming up to the middle of the week, boosted by increased ex-factory prices from Shagang and Shougang and also given the improvement in the futures market, China's long products market began to see an overall recovery.

In eastern China, the local construction steel market slid down before climbing up again during the past week, with a minor upward adjustment recorded compared with the previous week. Market confidence in this region has been strengthened by the increased ex-factory prices of Shagang and Magang as well as by the improvement in the futures market in the second half of the week. In addition, a residential building under construction in Shanghai toppled over almost intact several days ago, causing the local authorities to step up inspections of construction steel products, thus affecting the sales of certain unqualified rebars. Moreover, this move will also cause a reduction of supplies of unqualified rebar over a relatively long period of time, which is good news for the Chinese rebar market.

As regards the southern regions, the longs market fluctuated within a small range over the past week in a context of bearish trading activity. However, following Guangzhou Steel's hiking of its ex-factory prices, traders still have confidence in the market and have maintained their quotations stable throughout the past week.

Meanwhile, the northern China market began to show a downward movement. Following its ascension during the previous two weeks, the northern market needs time to consume some of its high-priced materials; moreover, the market prices in Tianjin, Jiangsu and Zhejiang have declined in recent days, placing great pressure on the Beijing market.

Generally speaking, given the relatively high prices of raw materials and the high ex-factory prices from mills, the mood in China's domestic longs market is still one of overall optimism. On the other hand, with the coming of the rainy season, demand levels will be affected to a certain extent. As regards the coming week, market prices are likely to fluctuate on a rising trend.