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| Review of Chinese steel market and outlook for September - 02 Sep, 2009 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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On August 17th CISA struck a deal on iron ore with FMG for half a year, hoping to maintain the stability of China’s steel market price. But it failed to support the steel market price. From the middle of August, steel price declined substantially in China. Rebar 20mm price was down by 2.6%, high speed wire rod 6.5mm reduced 3.6%, hot rolled steel was down by 4.1%, and medium plate 20mm increased 0.8%.
Price in CNY per tonne The steel price increases from early April, lasted for 17 weeks. Compared with the historical price, the steel price has recovered to the level of October 2008, the highest point of the recent 10 months. As a result of the economic growth, the production of the downstream steel industries is recovering. Therefore, the real highest point of steel price still does not form. Short term price callbacks can be regarded as the releasing risk of early market price rising continuously. As long as the demand increases, the steel price will push up. In addition, the steel enterprises will support the price rising stably for pursuit of profit. The forming mechanism of steel price is affected by many factors. The supply demand relation is the leading factor. Because of the overcapacity in China, when demand is weak, the steel price is enslaved to capacity. When demand is strong, the overcapacity is not a big deal to the steel price. The second factor is the change of raw material. As a middle industry and among intense market competition, the traders lack an effective way to transmit the cost in steel industry. Under the condition the raw material price increases beyond the tolerant, they promote the steel price. When it reduces, the traders will transmit the excess profit to the downstream requestors to win the competition, thus the steel price declines. The last factor is that the middlemen’s stock up goods and sell. The main factors will be effective to the steel market in China on September as follows 1. International market According to the data of International World Steel, the total number of steel production is 103.86 million tonnes in world’s 66 major steel producing countries and areas, down by 11.1% YoY. From last September, the production of crude rebar is more than 100 million tonnes in the first time. It shows the economic recovery is coming. 2. Raw material price The raw material price of upstream steel industry dropped greatly since late in August. But the coke was less affected.
3. Steel stock The steel price collapsed causes market expectation reversal. In afraid of a future decline, the downstream demanders decrease the orders, which cause the stock increasing. The main reason of arousing price decline is that traders and speculators’ selling lead to low market expectation. Because of the overcapacity, once the downstream demand fluctuates, it will increase the stock. According to the present, the steel stock will still increase in few weeks. Prediction of steel market price on September in China Because the reduction of the steel price in China caused the pessimistic mood, it is possible that the steel price will continue to reduce on September in China. The steel industry is safe from deficit as the steel capacity utilization increases fast and steel price rapidly rises. At present, the increasing demand in China cam wipe out the reducing export. The fear is that the steel stock in the historical highest level and high market price will cause the less buyers and slower market circulating. More and more professionals believe that market risk is increasing. steel enterprises, traders and end users all think that it will have a big change on September in China’s steel market. There is an important mark is that the change of American economic data in third quarter as American economic recovery is the prerequisite of the global economic recovery. If American economic indicator of third quarter is improved, it will be a huge inspiration to Chinese economy even the whole world. Demand of steel and steel price will increase. Otherwise, the steel price will drop severely. To know more details on steel prices subscribe to services of www.steelprices-china.com by registering or send a mail to admin@steelprices-china.com with contact details. Kindly note that this is a paid service with subscription charges of USD 750 for 12 months. (Sourced fromwww.steelprices-china.com) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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