Chinese HR market to be adjusted downward in near future

Wednesday, 04 Nov 2009

According to Mr Zhang Dongyong GM of Shanghai Gaiqun Trade Ltd, "We expect that the steel market price will continue fluctuation in adjustment in near future given the soft backup for deep rally based on our observation."

He said that the behavior of the market which went up first and then down in Shanghai is largely a result of the electric trade market or financial policy changes. Common carbon HR products have rebounded at CNY 3550 per tonne from earlier CNY 3250 per tonne to CNY 3280 per tonne and then swung and slip to CNY 3450 per tonne late last week and was traded at CNY 3420 per tonne on Thursday.

He added that there are absolutely no drives for the steep rise of HR price given the bleak spot market.

Mr Zhang Dongyong said "The biggest obstacles before the spot market rise would be the booming inventory and unbridled production release. Steel mills have always balked at the moves to cut production whenever the HR market kept falling in earlier period or started rally afterwards. The inventory has got substantially increased as a result. Now the HRC stockpile in Shanghai market has amounted to 1.3 million tonnes and is expected to beat 2 million tonnes.”

He said that "Another factor responsible for future market behavior is the funds available in the market. Banks are now withdrawing the fund. The Central Bank will likely strengthen it to dampen the risk of inflation.”

Mr Zhang said HRC price will be adjusted downward amid fluctuation. After this round of correction, expectedly in the whole November there probably will be a rally to a mild extent. Both ex-works and spot prices of HRC will remain at CNY 3500 per tonne or so.

He said that "But the market is expected to get on an even keel and start picking up from next March."

(Sourced from MySteel.net)
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