Chinese longs market shows weak and steady trend

SteelOrbis Shanghai Against the background of a bearish trading performance, Chinese long product prices were back down over the past week. In addition, market inventory kept going up at a slow rate, while export quotations continued on an upward trend. On March 9, the average price of 20 mm diameter HRB 335 rebar in the three major Chinese markets - Shanghai, Beijing and Guangzhou - was still at RMB 3,343/mt ($432), while that of 20 mm diameter HRB 400 rebar was at RMB 3,457/mt ($447), neutral week on week. Meanwhile, the average price of 6.5 mm Q235 high speed wire rod has decreased by just RMB 3/mt to RMB 3,387/mt ($438). China experienced a significant widespread drop in temperatures throughout the past week. In particular, the snow storms in the northeastern regions seriously affected the demand for long products. Due to the resulting bearish commercial activity observed in various regions, consumption was hindered and so market inventory saw a continuous rise during the week. However, based on the overall market situation, inventory growth slumped considerably compared with the previous week. Since most traders were confident concerning the future market trend, market prices climbed up during the beginning of last week. However, coming towards the end of the week, some traders with capital shortages began to sell part of their inventory at low prices for capital return, leading to a slight decline in the actual concluded price. After India's government announced the imposition of its export duty on iron ore, the Chinese iron ore market seized the opportunity to increase prices. Moreover, billet prices continued on an upward trend during the post-festival period. The above factors pushed up the production costs of the mills. With regard to exports, on account of the strong international demand, export quotations are stepping up continuously. Currently, billet export quotations are around $470-480/mt FOB, while those for long products are also close to $475-485/mt FOB - up about $10/mt compared with the previous week. Based on the present situation, since China seems destined to experience severe weather for the coming week, demand cannot recover dramatically in the short run. Therefore, the point at which market inventory will turn from an ascending to a descending trend will be decisive for the future market situation. Some mills have stated that they won't provide much supply to the market in March. As a result, inventory levels will probably slip down after mid-March and the prices will also begin to increase.