October 07, 2008

Chinese steel plate price likely to remain firm

It is reported that Chinese steel plate prices are still on the rise despite downward corrections in prices for other steel products. As of January 15th 2008 the average price of commercial 20mm HR plate reached CNY 5120 per tonne, hitting the new high since 2007. It is clear that steel plate price would continue its upward trend in early 2008.

Domestic steel market has been quiet recently and a lot of traders are employing wait and see attitude in face of so many uncertainties such as the spread of sub prime debt crisis, excessive liquidity, escalating inflation, acceleration in CNY appreciation and reinforcement in macro economic adjustment. However, plate market seems to be comparatively clear as both steel makers and traders are quite optimistic on the future performance. The major reasons lie in robust demand and short supply, especially the lower growth rate of supply.

The strong demand for steel plate from fast-growing mechanical industry is in vivid contrast with the lower growth rate of supply. The real plate supply only witness an average increase of 23% in the past months which compares with the rate in excess of 30% for mechanical industry.

According to statistics by Clarkson ship building industry is another great force working to boost demand for steel plate and would continue to bolster the market in the next few years, the total orders by global ship makers amounted to 500 million tonnes on loading capacity as of end 2007 up by 47% than early last year.

While Chinese ship makers have succeed to take new orders equivalent to 96.8 million tonnes in terms of carry capacity as of end November, achieving the first place in the world. The finished vessels by Chinese producers in 2007 are estimated to reach 16 million tonnes equivalent in loading capacity.

As a result, Chinese producers have been increasing the ship plate output substantially to meet the great demand. Besides, the ratio of ship plate is on the rise in steel plate production. In the first 11 months of 2007, the ship plate output by major Chinese plate producers reached 10.72 million tonnes a surge of 82.3%YoY.

The proportion of ship plate output to the whole steel plate also saw a rise of 3.8% to 14% for the first eleven months. Steel producers have realized the importance and the potential profit of ship plate production since ship makers have taken so many orders that will spread into 2010 and forwards.