Costs continue to push Chinese longs market prices upward

The Chinese longs market has moved on a general upward trend over the past week, supported by costs and by the transaction volume. In this context, domestic longs inventory has declined to a certain degree as compared to the previous week. 

At present, in the Shanghai, Beijing and Guangzhou markets, Q235 6.5 mm high speed wire rod prices are at RMB 4,460/mt ($654/mt), RMB 4,580/mt ($672/mt) and RMB 4,690/mt ($688/mt) respectively; HRB 335 20 mm rebar prices are at RMB 4,250 /mt ($623/mt), RMB 4,700/mt ($689/mt) and RMB 4,590/mt ($673/mt); while HRB 400 20 mm rebar prices are standing at RMB 4,270/mt ($626/mt), RMB 4,790/mt ($702/mt) and RMB 4,860/mt ($713/mt) respectively. All prices include 17 percent VAT.

Over the past week, the major domestic steelmakers have continued to raise their ex-factory prices. On Apri 10, Hebei Iron and Steel Group increased its wire rod price by RMB 150/mt ($22/mt) and its rebar price by RMB 250/mt ($37/mt). As a result, this producer's high speed wire rod price has risen to RMB 4,500/mt ($660/mt) while its rebar price now stands at RMB 4,600/mt ($674/mt). Influenced by the continuous rise in ex-factory prices and expectations of a continued upward trend, market prices kept rising over the past week. Previously, the increase in longs market prices was led by major cities such as Beijing and Shanghai; however, in the past week the price increase has been led by interior areas such as central China, with prices rising in general by a margin of RMB 200-300/mt ($29-44/mt) week on week.

At present, raw materials are indicating a strong price uptrend in the domestic market. The general transaction situation for iron ore is good, though supplies are not quite sufficient. The scrap market is stable generally but several steelmakers have started to raise their purchase prices. The billet market has shown an upward trend, with prices rising by RMB 100-170/mt ($15-25/mt). Pushed by rising costs, the finished steel market has indicated strong price rises.

As low-priced supplies have been sold off, newly-delivered high-priced supplies are expected to support market prices, and so the rising trend in the market is likely to continue. In the Shanghai area, due to the restrictions in place for Shanghai Expo 2010, some shipments cannot be delivered on time, causing inventory levels to decrease in the eastern China market. Based on the continuing upward trend in raw material prices, most traders in China's domestic longs market are optimistic about the future.