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Chinese steel price reaches record new high after Spring Festival
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Thursday, 12 May 2011
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It is reported that inventory consumption continued in April 2011 due to power limit and peak season in March and April 2011. Steel prices rose up amid vibration after Labor Day Holiday, reaching record new high after Spring Festival. However, part of steel traders held cautious attitude toward the following trend, guarding against possible risks from too rapid rise.

Part of provinces has issued power limit policy due to serious power shortage in April 2011, traditional power usage off season, possibly limiting steel output in following period. Steel prices in April 2011 rose up amid vibration owing to expectation for power limit and better demand in peak consumption season. After Labor Day Holiday, steel prices continued rising trend, reaching record new high after Spring Festival.

According to Myspic composite index by Mysteel, Myspic reached record new high 178.6 on February 15th 2011. On May 4th 2011, Myspic surged to 178.7, over the previous high on February 15th 2011.

The previous rising trend was due to Japan's strong earthquake in Mar, bringing good expectation for steel demand among global market. Moreover, China’s steel market ran into continuous inventory consumption since Mar, for instance, the total inventory volume of five main products, including rebar, wire rod, HRC, CRC and medium plate achieved highest on March 4th 2011 of 18.90 million tonnes. After that, the steel inventory showed a downward trend, the inventory volume of five main products totaled down to 15.41 million tonnes till April 29th 2011.

Entering into May 2011, some steelmakers like Shagang, Yonggang and Zhongtian Iron & Steel raised their ex work prices, pushing up steel prices.

But traders and analysts are doubt whether such a rising trend can last for long. Considering about the steel price at high level and thin transaction, the risks are increasing, possibly witnessing a turning point in the near future.

Holiday effect may push up steel prices further, but over rapid increase of steel prices may cause thin transaction and more resources from steel mills run into market, pulling down steel prices.

The expectation for production limit by power limit is just an expectation, which will not take into effect until the end of June 2011, the real peak season of power usage.

Furthermore, high crude steel output in first ten days of April 2011 at 197.92 million tonnes made the rising move can hardly continue. While some traders said steel prices may present a trend of rising more but down little due to high input costs.

(Sourced from MySteel.net)
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