Tuesday was another soothing day in Chinese steel market. Steel price improvement by 1% in the first two days has distinctly set a positive note. On the face it appears to be market making some positive adjustment after mayhem in July. Since the core fundamentals remains unchanged rally can be viewed with circumspection.

Reportedly, domestic mills have intensified overhauls, involving production lines of construction steel, medium plate, HRC, high-quality special steel along with 14 blast furnaces. Steel stock with mills also dropped by -0.67% touching 15.37 million tonnes from 15.48 million tonnes during the course of the week.

However such passing happenings cannot have sustainable impact on the market levels unless demand picks up.

With iron ore price at its lowest level since October 2011 and coking coal levels hanging in limbo on augmented supply from Australia input cost is unlikely to provide resistance to the finished levels at least till end August.

Global economic cues indicate that end Q3 and beginning Q4 will see revival in buying and economic activity as the stock replenishment will commence before the winter vacation.

Falling tendency is unlikely to recede in August. With the unfolding of growth policies, the whole market may turn optimistic in early September. In the meanwhile such occasional blips would certainly keep the expectation alive.

CLPPI - Chinese Long Product Price Index
CFPPI - Chinese Flat Product Price Index
CHISPI - Chinese Steel Price Index
(www.steelprices-china.com)

Source - Strategic Research Institute

(www.steelguru.com)