Trading in China’s long products market becomes increasingly slack

China's domestic long products market has become characterized by increasing slackness in terms of trading activity as the Spring Festival (February 14-21) approaches, with mixed performances observed in the various regions. Meanwhile, the fall in the steel futures market has had a certain impact on the domestic market.

By the end of trading on February 5, market prices of 6.5 mm Q235 high speed wire rod were at RMB 3,900/mt ($572/mt), RMB 3,730/mt ($547/mt) and RMB 3,880/mt ($569/mt) in Shanghai, Beijing and Guangzhou respectively; meanwhile, 20 mm HRB 335 rebar prices stood at RMB 3,660/mt ($537/mt), RMB 3,730/mt ($547/mt) and RMB 3,860/mt ($566/mt) in the above respective areas, with 20 mm HRB 400 offered at RMB 3,770/mt ($553/mt), RMB 3,830/mt ($562/mt) and RMB 4,140/mt ($607/mt) respectively.

In eastern China, long products prices in Shanghai and Hangzhou have climbed up slightly by RMB 20/mt ($3/mt) during the past week. Market prices in these areas moved up before sliding back down under the impact of the sharp fall in the futures market. Meanwhile, all the other markets in eastern China have maintained a general stability throughout the past week.

The Guangzhou market in the south has been following a stable trend, with players mainly busy collecting payments in recent days. As regards the northern regions, apart from some individual traders that have continued to book orders from construction sites, overall market demand has appeared quite weak during the past week. With traders gradually leaving to start their holidays, less than 70 percent of traders currently remain in the market and most of them are preparing for the upcoming holidays. It is heard that only a small number of construction sites are likely to maintain operations during the Chinese New Year holiday, and this is expected to result in very low demand in the coming period.

On the mills' side, Shagang recently announced its prices for early February, with wire rod prices up by RMB 60/mt ($9/mt) and rebar prices remaining unchanged from previous levels.

As regards market inventory, wire rod inventories in the various regions have seen a minor rise compared with the previous week, while overall rebar inventory has continued to climb up by a significant margin in the past week.

On the raw materials side, the domestic pig iron market has maintained a general softness over the past week, with varying decreases recorded in the various regions. Meanwhile, the scrap market has been characterized by weak stability against a background of sluggish trading activity; domestic billet prices, on the other hand, have moved on a stable trend, though with a limited decrease of RMB 30-50/mt ($4-7/mt) seen in some regions.

Australian miner Rio Tinto is reported to have finished its first round of talks with the Japanese and South Korean negotiators and is heard to be seeking a 40 percent increase in iron ore prices for 2010. Both sides have agreed that prices will increase and are now expected to focus mainly on the extent of the markup. Generally speaking, with the anticipated high inventory levels and tight capital supply, the Chinese long products market is likely to face a more complicated situation in the post-holiday period.