May 17, 2008

Steep Chinese Steel prices may deter steel export

It is reported that Chinese steel prices have been perching over a high track recently and the steep price might dampen the export demand and lead to steel shipment decline to other countries. Meanwhile, the accelerating domestic steel capacity installation could tip the domestic market fundamental into over supply and increase the price volatility downward in days to come.

Mr Wu Xichun senior advisor to China Iron & Steel Association at a recent industrial conference said that soaring steel prices in the first two months of this year has pushed up the Producer Price Index by 6.6% in February 2008. As a result, Beijing is set to step up efforts in restraining rampant steel price rally.

He said "Ballooning domestic steel price has come against the backdrop of robust demand and moderating steel output growth during January to February. The movement of balance between supply and demand, including production growth pace, import and export volume would be the major factor determining the steel price in April.”

Mr Wu said that domestic steel prices now have close tie with global prices, and global steel prices are stepping into a high level bolstered by booming demand, weakening US dollar and tight supply of resources.

Current steel price has already exhausted the push from escalating input costs. And the market demand has been exaggerated by steel traders who are piling up materials in anticipation for further price hike.

(Sourced from MySteel.net)