Securities Daily reported that domestic steelmakers have been trapped in a lasting falling trend amid the clouds of increasing production and lofty stockpiles and the added-up price drops are so big as to offset the effects cast by cancellation of export tax rebates which was issued weeks ago.
The previously set export tax removal for certain steel products, indicating the government’s will to intensify restructuring of the industry, will force the steelmakers to lift export price in order to secure stable shipment. But the recent falls in domestic steel prices have, take Tianjin’s plate for instance, added up to as much as more than CNY 300 per tonne from CNY 4200 per tonne over CNY 3800 per tonne.
The rebate of 11% it enjoyed before the policy is supposed to be shouldered by both the domestic mills and overseas buyers, so that the home based exporters will in fact suffer 5.5% loss or some CNY 200 per tonne on the rebate withdrawal.
Based on market report, the steel price kept declining last week, with wire rod and rebar falling CNY 40 per tonne to CNY 100 per tonne and 20mmHRB has dropped to CNY 3833 per tonne on average among 23 major cities. Construction steel and HRC are reportedly going below CNY 3700 per tonne and CNY 3900 per tonne respectively.
Market observers believed severe contradiction in supply and demand remains the essential obstacle to price rebound. This year, crude steel production came to 268.9 million tonnes through May up by 23.8%YoY.
CISA forecast the production hardly to stay below 52 million tonnes in June while the totaled steel stockpile have stood firm at some 16 million tonnes since later April.
Production cuts are thus badly needed.
Some data showed maintenances in July are extended from June involving 22 steel processors’ cuts, 5 mills’ suspension and 4 blast furnaces’ overhaul. Besides, large producers are joining in the club, such as Tangshan Steel, Wuhan Steel, Shagang and Pangang. And the products spread from rebar and wire rod to HRC, plate and crude steel. But there will be time lag and the leading steelmakers’ pricing for August could still show falling trend.
(Sourced from Securities Daily)
