Steel Prices Down on CBRC Notice

SHANGHAI, Mar. 30 (SMM) – Steel prices fell sharply Thursday along with the plunging Chinese stock and futures market. Rebar futures prices were down 74 points from a day earlier, and Shanghai Composite Index and Shenzhen Component Index fell 65 and 265, respectively. Of them, bank stocks all staged declines, with stocks of commercial banks all falling over 6%/

 

The slump in stock market was due mainly to the notice released by the China Banking Regulatory Commission on standardizing wealth management businesses of commercial banks, which stated that regulation on wealth management operations will be stricter. 

 

The off-balance sheet investment of shadow banking system was again targeted in the notice of the CBRC. Enterprises still obtained loans through credit assets made outside banks or security exchanges, trust financing, acceptance bills, L/C, receivables, and beneficial interests before the release of this notice. Now market concerned that the regulation on non-standardized loans and investment will be tougher, which may thus lead to tighter liquidity. 

 

In this context, hot-rolled coil prices fell RMB 30-50/mt to RMB 3,800-3,830/mt, and down RMB 50/mt to RMB 3,870-3,880/mt in Lecong, while prices in Tianjin were down RMB 30/mt to RMB 3,710-3,740/mt. Steel demand is expected to be damped if the government tightened liquidity. As lending businesses takes up a large proportion in overall business of some commercial banks which are also major banks issuing loans to steel traders, Steelease believe the cash flow of some steel traders will also be negatively affected.