In the week from August 31 to September 4, construction steel prices in the main districts of China continued to fall, but the speed of decrease is slow.
Rebar price continued to fall in the Shanghai area, by CNY 140 per tonne last week and by September 4 stood at CNY 3510 per tonne. Steel prices declined substantially in the Beijing area, which fell by CNY 200 per tonne last week to CNY 3620 per tonne. Steel price set back quickly in the Guangzhou area, which fell by CNY 140 per tonne last week to CNY 3860 per tonne.
In accordance information from the steel spot trading platform up to September 4 in the major markets in China, the average price of rebar 25mm was CNY 3655 per tonne, down CNY 133 per tonne on last Friday. The average price of high speed wire rod in 6.5mm was CNY 3605 per tonne, down by CNY 125 per tonne.
According to some traders demand is still low, specifically showing that the end-users need of steel will be low. At the same time, the trade between the traders is less in the spot trading platform. The trading volumes of daily average rate of spot steel this week remains unchanged compared with last week. Traders lose confidence to the market because of the declining price.
The factors which affected the reducing steel price last week are as follows
1. EXW price of leading steel enterprises dropped greatly. It is reported that almost 30 rebar and wire rod coil manufacturers reduced their EXW prices last week. Sha Steel and Zhongtian construction steel price reduced more than CNY 350 per tonne. The high speed wire price of Hebei Steel was down to CNY 1000 per tonne. However, compared to the market price, the price gap is still as large as CNY 100 to CNY 400 per tonne.
2. The raw material price decline simultaneously. According to data, up to September 4, the price of 20MnSi billet was CNY 3300 per tonne in Shanghai, down by CNY 130 per tonne on last Friday; the price of steel scrap was CNY 2550 per tonne in Jiangsu, down by CNY 100, and the coke price was CNY 1680 per tonne in Shanxi, down by CNY 70 per tonne.
3. Increasing construction steel inventories:
According to the present status, enterprises still have a profit space so that it is hard to realise limited production prices. Because of the high pressure of inventories, the steel price is difficult to increase.
Therefore the following factors would play an important role in determining the future trends for steel prices in China.
1. Moderate monetary policy causes dispute. On the one hand, central leaders say that China will continue to hold a moderate monetary policy in future, and the policy will not change now and then. On the other hand it is more likely that they will moderately tighten monetary policy. Obviously, tightening liquidity will influence the capital market and commodity market.
2. Real estate market faces policy test:
According to the Ministry of Land and Resources, in the circumstance of projects pulling domestic demand and social usage, they will strengthen land after regulation. It indicates that related policies will begin to limit the development of real estate market, which already has big problems. To the construction steel market, the latter demand release is also uncertain.
3. International steel markets begin to divide:
Demand of European market is increasing since the traditional quiet season is at an end and the price may rebound. Because of short supply, steel enterprises are push prices up in the US market, while in the Asian market, the increase becomes slow. Objectively, the downward trend of Chinese steel market may be good to the export and part of customers is increasing the orders.
Source: Steel Prices China
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