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Tight Cash Flow and Uncertainty to Housing Policy to Influence Hot-Rolled Steel Price
Mar 27,2013 15:53CST
industry news
Source:SMM
Hot-rolled steel prices soared before falling sharply on March 26 with both futures and stock markets staging extending declines.

SHANGHAI, Mar. 27 (SMM) – Hot-rolled steel prices soared before falling sharply on March 26 with both futures and stock markets staging extending declines. Meanwhile, some warehouses in Shanghai were reportedly involved in pledges by false warehouse warrants and were closed for investigation, adding to market concerns over price outlook.

The specific rules for housing market control have been introduced in Guangdong late Monday, but major concerns, such as the 20% income tax on home sellers' gains and the target for housing price curbs, were downplayed in the rules. Chen Rugui, executive vice-mayor of Guangzhou, said the increase of property prices in Guangdong's provincial capital will not be more than the city's GDP growth rate this year. The GDP growth last year was 10%, indicating upward room for house price hike.

The uncertainty surrounding property policies left steel prices diverged. Given the high inventories in trading market and steel mills, and tight cash flow in March, as well as the slow recovery in downstream demand, hot-rolled steel prices are expected to keep falling. As the high inventories following the Chinese New Year were the result of strong wait-and-see mood among downstream enterprises and increasing output at steel mills boosted by continuous rises in hot-rolled coil prices, housing policies will be determinant to the recovery of steel demand. Thus, any news about rules for housing market regulation will be focused in the near term.

Some steel mills have planned to cut production but in limited amount, leaving little support to steel prices. Ansteel will start its 8-9 days of maintenance to its 1580 rolling unit in April with output expected to fall 70,000 mt. Liuzhou I/S will suspend one hot-rolling production line with weekly output at 25,000 mt. Rizhao I/S plans to cut its hot-rolled steel output by around 10%, and Shagang’s 1450 rolling unit has been operating incorrectly for over half month, and is now still under maintenance.
 

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