Analysis of rebar market scenario in China before National Day
Wednesday, 16 Sep 2009
In the last week during September 7 to September 11, the trend of construction steel price in main districts of China had a very clear differentiation. Steel price in east China firstly rebounded narrowly, and other areas continued to decline.
Rebar price slightly increased in Shanghai area, which increased by CNY 50 per tonne last week and by September 11th was CNY 3560 per tonne. Steel price declined narrowly in Beijing area, which reduced by CNY 50 per tonne last week and was CNY 3570 per tonne. Steel price set back in Guangzhou area, which reduced by CNY 70 per tonne last week and was CNY 3790 per tonne.
The trading volumes of daily average rate of spot steel increased 54% compared on last week and it was characterized that transactions were active in first half of the week while demand was reduced in second half of last week for the increasing price. Specifically, the present steel price has closed to the cost, thus the end demand will increase. At the same time, because of the National Day, peak of purchase appears in some areas. Therefore, the enlarged end demand pushes up the price. However, the future of transactions is still uncertain.
The factors which affected the reducing domestic rebar price last week are as follows
1. The price policy of steel enterprises has divided. It is reported that 31 rebar and wire rod coil manufacturers adjusted the EXW price. And 13 of them slightly increased the price. It reflects that factories are eager to increase the steel price though the little rebound. In this way, it is hard to control the production and reduce the inventories.
2. The raw material price stopped declining. Up to September 11, the price of 20MnSi billet was CNY 3300 per tonne in Shanghai, unchanged on last week; the price of steel scrap was CNY 2500 per tonne in Jiangsu and the coke price was CNY 1680 per tonne in Shanxi. Therefore, the raw material market remains weak trend, and the overall price levels off.
3. The rebar inventories temporarily stop rising. At present the total domestic building steel inventory is 5.6 million tonnes down by 79,000 tonnes on last week. Beijing, Hangzhou and Guangzhou all lessen the inventories.
Therefore following factors would play an important role in determining the future trends for steel prices in China.
1. Steel capacity continues to increase
The data of the National Bureau of Statistics shows that pig iron, crude steel and steel rebar is 49 million tonnes, 52 million tonnes and 62 million tonnes respectively, created new high. Although production lines overhaul increased, it is still difficult to limit the capacity. Simultaneously, the National Day also affects the demand release.
2. Good credit
The new added RMB loans in August are CNY 410.4 billion up by 34.11%, and market interest declined 0.11%. It shows that traders have confidence on the market, and the structure of credit will begin.
3. Export volume of steel reached new high in August.
The export volume continuing to increase reflects that the external demand becomes better. On the other hand, as the international steel price remains on up path while in China the price reduces, the difference in price is decreased. The export volume may increase in later period.
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