Rusmet reported that Steel products prices in China have been increasing for more than a month. Chinese metallurgical companies continue to increase quotations despite the specialists’ complains about excessive supply and export volumes fall.
HRB335 rebar of the diameter 16-20 exceeded CNY 3400 per ton in the middle of May in the most competitive Shanghai market. In other regions of China this rebar price can reach CNY 3700 per ton. Commercial HRC have also exceeded CNY 3400 and are quoted in eastern provinces at CNY 3400 to CNY 3500. CR steel exceeded CNY 4150 per ton almost everywhere. Even plate, which is the most difficult product from the supply and demand point of view, has grown to more than CNY 3300 per ton.
According to Chinese experts, growth is to slow down in the nearest future or even change to recession. Nevertheless, nobody expects serious fall. Some specialists consider rebar and HR steel price reach CNY 4000 per ton in Q3.
The State economy stimulating program gave expected effect. According to the National Statistics Bureau of PRC, the investments into basic capital in the first four months of 2009 grew by 30.5 %YoY. The investments into new construction projects in cities grew by 90.7 %. Residence construction market also growth after long recession. The number of cars sold reached its top figure in April 1.15 million. All these factors provide stable demand for steel products first of all for long products.
Surely, turning of China into steel net-importer bothers Chinese Iron and Steel Association which has asked the Government to increase the range of steel products falling within VAT refunding. However, the majority of Chinese metallurgical companies seem to be uninterested in foreign sales. Indeed, everybody can use the loophole in the law which equates steel with micro additions of boron to alloyed steel. The suppliers of this steel get back the majority of paid VAT. Due to this they have the opportunity to decrease prices by about USD 40 per tonne to USD 50 per tonne. In April and early May it was reported about export rebar, HRC and plate micro alloyed with boron by Chinese companies. But total volumes of the supplies remain small.
The thing is that even at the VAT refunding, the income of Chinese companies from export is too low. In early May the price of Chinese HRC in external market was about USD 450 per tonne to USD 480 per tonne FOB plate price was USD 440 per tonne to USD 470 per ton FOB. At that the products are exported mostly to Korea, Vietnam, Taiwan, and other neighboring countries. Demand level there is rather modest. Chinese rebar price was about USD 460 per tonne to USD 480 per tonne FOB which made it quite competitive but the growth in domestic market has decreased the interest of Chinese manufacturers in export to null level.
There is no reason for Chinese companies to increase export if domestic EXW prices are by USD 30 per tonne to USD 60 per tonne higher than FOB prices. Moreover, the demand in domestic market is substantially higher than in export market. The situation in Chinese metallurgy is not bad enough to export excessive steel at any cost. But if recession in Chinese market turns into long term fall, then it will be possible. However this is unlikely to happen.
Chinese metallurgists really need the protection of the domestic market from foreign competitors. Indeed, if the optimists’ forecasts about prices growth to CNY 4000 come true, US and European companies will export to China. China has already taken some protective measures. The Ministry of Trade of China announced beginning of antidumping case against Russian HR steel.
China is likely to solve its metallurgy problems by means of the industry regulating rather than export stimulating.
(Source from Rusmet.ru)
