After the CNY 1 trillion driven indicative up turn in steel prices of billets, plates and HRC in some select locations on Friday, Chinese domestic market has caught fire on Monday giving a clear direction to market players for short term

The Chinese domestic prices have been coming down almost everyday since April 15th with total loss crossing 20% or say average 1% weekly. Thus after almost 5 months of downtrend, the massive recovery today has suddenly changed the mood among the market participants

1. The Cause
China’s powerful economic planning body, the National Development and Reform Commission, announced approvals for projects that analysts estimate total more than CNY 1 trillion, roughly a quarter of the total size of the massive stimulus package unleashed in response to the global financial crisis in 2008.

2. The Effect
The price pick up in CNY per tonne for various products today ie September 10th as compared to Friday closing has been as under

Billets - USD 8 per tonne to USD 25 per tonne
Shanghai 50, Jiangsu 50, Shandong 150, Fujian 100, Guangdong 160, Henan 150, Hebei 80 +80 on Friday, Shanxi 140, Liaoning 120 and Yunnan
(www.steelprices-china.com - a JV with SteelHome)

Rebar - USD 2 per tonne to USD 21 per tonne
Shanghai 40, Hangzhou 110, Nanjing 50, Wuxi 50, Jinan 70, Hefei 70, Fuzhou 130, Nanchang 80, Guangzhou 40, Nanning 50, Changsha 10, Wuhan 100, Zhengzhou 80, Beijing 60, Tianjin 120, Baotou 10, Shijiazhuang 100, Taiyuan 70, Shenyang 40, Changchun 50, Harbin 20, Chongqing 70, Chengdu 70, Guiyang 30, Kunming 50, Xian 50, and Lanzhou 90
(www.steelprices-china.com - a JV with SteelHome)

Angle - USD 2 per tonne to USD 47 per tonne
Fuzhou 10, Hangzhou 20, Nanjing 20, Wuxi 20, Shenyang 20, Changchun 20, Harbin 20, Hefei 30, Lanzhou 30, Urumchi 30, Nanning 50, Chongqing 50, Chengdu 50, Guiyang 50, Kunming 50, Guangzhou 80, Shijiazhuang 100, Taiyuan 100, Tianjin 180, Baotou 260 and Beijing 300
(www.steelprices-china.com - a JV with SteelHome)

HRC - USD 2 per tonne to USD 46 per tonne
Shanghai 80+30 on Friday, Hangzhou 80, Nanjing 90, Wuxi 80+30 on Friday, Jinan 150, Hefei 20, Fuzhou 100, Guangzhou 240+50 on Friday, Nanning 80+20 on Friday, Changsha 50, Wuhan 30, Zhengzhou 160, Beijing 170, Tianjin 220, Baotou 100, Shijiazhuang 150, Taiyuan 160, Shenyang 120, Changchun 80, Harbin 70, Chongqing 130, Chengdu 70, Guiyang 50, Kunming 60, Xian 80 and Lanzhou 50
(www.steelprices-china.com - a JV with SteelHome)

Plates - USD 2 per tonne to USD 25 per tonne
Shanghai 50, Hangzhou 100, Nanjing 50, Wuxi 80, Jinan 60, Hefei 20, Fuzhou 50, Guangzhou 50, Nanning 30, Changsha 30+20 on Friday, Wuhan 20, Zhengzhou 160, Beijing 80, Tianjin 110, Baotou 100, Shijiazhuang 140, Taiyuan 100, Shenyang 20, Changchun 50, Harbin 70, Chongqing 20, Chengdu 30, Guiyang 30, Kunming 20, Xian 10 and Lanzhou 50
(www.steelprices-china.com - a JV with SteelHome)

3. Emerging Scenario
Although many market players remain weary that the stimulus driven steel demand will get buried under the huge surplus capacity and production. But in all likelihood, the slide in FOB levels for export would be arrested as mills will start pushing volumes in domestic market giving breather to steel mills globally

But the sentiment lift may be temporary pending details on how these projects would be financed, with the central government unlikely to shoulder the funding burden. Moreover China's continued curbs on the property sector may also limit the impact of the infrastructure projects as construction accounts for 30% of China's steel demand versus 20% for infrastructure.

Another point to be noted is that it will take months if not years for China to implement these infrastructure projects and they are unlikely to lift physical steel prices until next year, as the industry is still massively oversupplied. As per unconfirmed reports the Chinese steel capacity is in excess of 850 million tonne as against consumption of about 650 million tonnes

Thus we need to wait and watch the price movement for next few days to gauge and form an opinion

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Source - Strategic Research Institute

(www.steelguru.com)