December 02, 2008

Chinese medium plate remains stable amid general price slide

It is reported that since mid May 2007, medium plate in China has reported very small price fall of CNY 100 per tonnes as compared with other flat products amid the sweeping downward movements as a result of a series curbing policies. HRC has lost over CNY 400 per tonnes.

A Mysteel analyst tried to explain why medium plate has stood comparatively steady on the market.

1. China fast economic growth and industrial restructuring strengthen demand for medium plate. Over the first five months, industrial added value grew by 18.1% YoY in particular, vehicle manufacturing, which is closely related to medium plate demand, reported a 27.1% growth. Strong investment in infrastructure construction also supported demand for medium plate and also its market running.

2. Development of the downstream sectors drive up demand for specialty plates and thereby bolster overall medium plate price. According to CISA statistics, the major medium plate producers made 2.93 million tonnes shipbuilding plate up by 53.6% YoY, 1.1 million tonnes container plate, up by 76.5% YoY and 900,000 tonnes pipeline steel, up 66.7%. Shipbuilding plate and pipeline steel took higher ratio of 29% and 9% respectively out of total output of the medium plate mills.

3. Medium plate is not involved in electronic trading. By referring to forecasts for next three months in terms of capacity release, export trend etc, futures trade can affect present spot market also. It is believed HRC would not drop so quickly without disturbance of the forecast made for electronic trading, given current supply demand equation.

4. Medium plate posts better export situation. By April 2007, China exported a total of 2.4 million tonnes medium plate representing 15% of the output, higher than that of 12% for HRC. In April 2007, export of medium plate took close to 20% of the output while HRC posted less than 15%.

As a comparatively short supplied variety in the world, medium plate bears better prospect than HRC after Beijing imposed a stream of curbing export tax policies. Still, the analyst warns of fast capacity increase and possible slowdown of economic growth. This year, medium plate supply has jumped some by 30% YoY, well above figures for last two years of 13 to 16%.

(Sourced fro MySteel.net)