SteelOrbis Shanghai
Chinese wire rod prices continued their sharp fall over the past week with a slight increase observed in market inventory. Meanwhile, the rebar market remained stable with a slight decline in inventory. The trading performance improved during the week and the downward momentum in the market gradually began to disappear.
On June 15, the average price of 20 mm diameter HRB 335 rebar in the three major Chinese markets - Shanghai, Beijing and Guangzhou - was up RMB 3/mt to RMB 3,373/mt ($443/mt), while that of 20 mm diameter HRB 400 rebar had dropped RMB 23/mt ($3/mt) to RMB 3,487/mt ($458/mt). Meanwhile, the average price of 6.5 mm Q235 high speed wire rod was down RMB 73/mt ($10/mt) to RMB 3,477/mt ($456/mt).
In southern China, influenced by the rainy weather of the past week, the local rebar market showed quite sluggish movement. Although there was no great change observed in prices, commercial activity registered a very bad performance. In northern China, the end-users did not stand aside after the gradual stabilization of rebar prices, leading to a slight rebound in market prices.
Wire rod prices continued to go down considerably. Stimulated by the relatively high market prices, mills strengthened their supply to the market, resulting in rising inventory.
Nevertheless, after the continuous decline, the market atmosphere has changed. Currently, traders are suffering heavy losses and are not willing to sell at lower prices. Meanwhile, ex-factory prices are still higher than market prices in spite of the various downward adjustments made by the mills. Therefore, the market players are no longer so pessimistic and have begun to await future developments with some hope.
The latest figures released by the Chinese authorities have also played a certain role in boosting up market confidence. In the first five months of this year, China's urban fixed assets investment totaled RMB 3.2045 trillion ($420.5 billion), up 25.9 percent compared with the same period last year. This growth was 0.4 of a percentage point higher than that for the first four months of 2007, indicating that demand continues to remain at a relatively high level.
Furthermore, China's crude steel production totaled 41.3 million mt for May, up 15.7 percent year on year, showing a remarkable slide in its growth. The average daily output reached 1.3325 million mt, down 11,500 mt compared with April. Rebar production for May reached 8.22 million mt, up 14.7 percent year on year; wire rod stood at 6.71 million mt, up 13.4 percent.
In May, Chinese long product prices remained at a high level, but a sharp fall was registered in month-on-month production growth. This may be due to the efficient functioning of the government's measures for the elimination of out-of-date capacity. If this is true, then there should be considerable room for further reduction in production growth.
As for next week, the continuing rainy weather is due to come to an end in the southern regions and so market demand is expected to see a gradual recovery. Meanwhile, the support of the lofty raw material prices will also contribute to the slowdown of the long product price decline. All in all, the market is likely to see slight fluctuations in the short run.