Week 32 ended on somber note with price debacle stemming for a change. After a thudding 1% decline in steel prices till yesterday, week ended in eerie silence.
Rebar levels took the maximum brunt with 2% decline during the week however today showed faint improvement. As the dust settles next week clarity is expected to dawn on the market direction.
It was widely believed that probably this would be last round of shedding before economy and market steps up the momentum. Typically end of Q3 and early Q4 is touted as the period of accentuated economic activity. Propelled by seasonality and pre-winter stocking this period is characterized by improved consumption.
Even though the external market remains emaciated with unending impasse in EU, undulating recovery in USA and reticent MENA buying is likely to improve in these market as the inventory levels in the supply chain has become tight. Post Ramadan and European vacation improved buying is inevitable although its duration is questionable.
Moreover the EU nations are likely to reach a consensus on bailing out Spain and Italy has led to enthusiasm.
Chinese domestic economy has reached a stage of stagnancy with GDP expected to remain in the 7-8% range in 2012 .At the same time inflation has been effectively tamed by holding a tight noose over the lending rates over the past 18 months. Cosmetic relaxation in CRR since March has fizzled away in need for bigger stimulus.
Production pruning by domestic mills will bring down the inventory levels progressively obviating supply pressure. State government infrastructure programs are likely to unfold during the coming months before winter kick starting buying.
Even though certainty would be whimsical in the background of trend defying price movement in China over the past 1 year dynamics seemed poised for revival after the last plunge before winter.
CLPPI - Chinese Long Product Price Index
CFPPI - Chinese Flat Product Price Index
CHISPI - Chinese Steel Price Index
Source - Strategic Research Institute