Despite the upcoming winter and low temperature, China's construction steel market has maintained an uptrend since National Day holiday except for some slight adjustments in Northeast and South China.
According to statistics from Mysteel, 20mm second grade rebar price averaged CNY 4116 per tonnes on November 8th 2007, a new record in the history, up CNY 182 per tonnes from that before National Day holiday and CNY 45 per ton higher than previous record set in Feb of 2004. Construction steel price in major cities such as Shanghai, Hangzhou and Guangzhou all hit or break previous records.
This year has witnessed quickest economy growth in China in recent decade, with GDP gaining 11.5%YoY in the first three quarters. In the meanwhile investment increased by CNY 1.64 trillion or 26.4% to CNY 7.82 trillion. Surging investment triggered the expansion of construction steel consumption. Moreover, rising consumption level, excess liquidity of capital, rocketing prices for resource and energy products all imply a possible inflation in China. CPI growth rate has far exceeded that in previous years. Against such a backdrop, the hike of construction steel price seems reasonable.
As winter steps near, temperature will drop, leading to a dead season for construction steel market. But statistics in recent years show the influence of the season is weakening. In some cases price presents stronger uptrend in winter than in other seasons.
The first is production cost. Hauled by China, prices for resource products such as iron ore and oil have experienced astonishing upswings. High cost is the dominant factor pushing construction steel price at a high level.
The second is increasing sanction of resource. International iron ore supply becomes tight due to swift growth of China and other countries. China's iron ore import volume fell in this year but price climbed, indicating a short supply. Slowing iron ore supply inevitably restricts construction steel output.
The third is would-be freight rate hike, spurred by soaring prices for crude oil and oil products worldwide. Freight rate for Bayuquan/Tianjin to Shanghai/Guangzhou has gained 40% to 60% over that in early this year. As National Development and Reform Commission pulls up oil products prices, freight rate will rise further. Even some resources flow into southern regions from Northeast and North China in the future, it will not impact notably owing to high arrival cost.
The fourth is midseason in South China. In Shanghai large scale rebars is still in scant supply, signifying some projects are still under construction. In the meanwhile social stock in South China remains at a low level. Limited fresh resources can not influence the market remarkably.
China's construction steel has long served domestic market whilst export market affects little. Though construction steel exports increased during last year and the first half of this year, export volume merely accounts for 5% of total output. Currently market rumor circulates that export rebate on all steel products will be removed next year and export tariffs on long products will be raised further.
In current situation, even export tariff on construction steel is pulled up it will lead to mild influence, thus construction steel market can still maintain firm operation in the future.
(Sourced from MySteel.net)
