Slack trading in China’s long products market

Driven by the increased ex-factory prices of various mills, China's domestic long products market continued to rise during the past week, while a remarkable shrinkage was seen in the overall trading volume.

Following the previous price hikes made by the leading mills, China's medium and small-sized mills made successive upward adjustments to their prices during the past week, thus driving domestic long product prices up further. However, due to the remarkable shrinkage in the trading volume, the increase range has been quite limited.

Affected by the decreased supplies from Shougang and Hebei Steel, the Beijing market took the initiative in the price uptrend in the past week. Meanwhile, given the successive upward adjustments made by Shagang and Magang, the eastern Chinese market also continued to rise. Nevertheless, coming up to the end of the week, influenced by the decline in billet prices, some regional markets showed a certain degree of softness. In addition, the market in the south registered a minor rise, with improved commercial activity observed during the second half of the week.

As regards raw materials, China's domestic pig iron market has remained stable, with the trading volume at normal levels; meanwhile, the scrap market has indicated a general stability; finally, billet prices in Tangshan slumped considerably during the past week.

Overall, the producers' successive upward price adjustments, climbing production costs, and the overall decline in market inventory have constituted the principal sources of momentum behind the rise in market prices. Moreover, with the approach of the rainy season demand for long products will go down, and this expected decline has already been heralded by the obvious shrinkage in the trading volume. In this context, it is expected that China's long products market will enter a phase of downward movement in the coming weeks.