Chinese steel market has maintained stoic silence over the past one week much to the astonishment of global operators. However with bit of incision the obvious come to the fore. Change of guard slated for November 8th has kept market in limbo for both finished and raw material.
Traders and stockiest have remained subdued in absence of clarity on the direction of economic and industrial policy. This has resulted in inactivity in the market which has remained unchanged for the last 1 week. Iron ore levels have remained unmoved during the period reflecting lull in transactions.
Ironically backed by graduated hike in steel prices by 10% over the last 2 months market sentiments had been riding crest in Q4. Even though price increase has been punctuated by changing political dynamics Chinese mills have remained resolute in production spree with crude steel output touching 1.9992 million tonnes, up by 4.1% compared with that in previous ten days and 8% since September end. Rubbing salt to injury the finished steel product inventory in major markets is remained alarming at 12.43 million tonnes despite gradual reduction since National Holiday.
However the market is unlikely to relapse much in the sunset of 2012 as infrastructure projects and unlikely shift in policies by the new regime would keep buoyancy intact. Moreover increase improved PMI from 49.2 to 49.8 in September indicates better consumer activity. Fixed asset formation has also shown faint revival with growth of 0.1% recently. Given the speculative tenor of steel market in China traders maintaining prices lower than the mills price but with the inklings of hike keeps transactions agog.
CLPPI - Chinese Long Product Price Index
CFPPI - Chinese Flat Product Price Index
CHISPI - Chinese Steel Price Index
Source - Strategic Research Institute