SHANGHAI, Apr. 1 (SMM) – Shagang will unveil its April’s ex-works prices for hot-rolled coil on Monday. Although Hangzhou’s traders refused to place order in a protest against Shagang so as to obtain rebates, Shagang showed mild response after prices of Ningbo I/S. However, it was reported that Shagang will lower prices by RMB 300/mt in April and offer RMB 300 rebate for March’s orders. This was in line with price adjustment of Ningbo I/S. Proportion of orders of Shagang was set at 80%, below the 90% set by Ningbo I/S. Two major factors have resulted in Shagang’s the price adjustment.
First, ex-works prices offered by Shagang were RMB 400/mt lower than market prices which kept falling after the Chinese New Year. The severe losses of steel traders caused Shagang to offer rebates to traders so as to guarantee the orders.
Second, imported iron ore prices have fallen USD 13/mt or 10% after the holiday. The lower cost allowed room for steel mills to cut prices.
Profitability at steel mills was disappointing last year according to reports of mills as rising iron ore prices squeezed their profits. As such, it was reasonable that mills cut discounts for traders. Steel mills may still see meager profit margin this year, and elimination and consolidation of steel mills will proceed.