SHANGHAI, Jul. 26 (SMM) – China’s EMM market has been sluggish since early May, and spot price has fallen from more than 13,000 yuan per tonne to 10,000 yuan per tonne. The EMM market is now in supply glut, and EMM producers’ supply cut and no sales at lows will not relieve the supply&demand imbalance in a fundamental way, and price will be not well supported in turn.
When will the sluggish market, lasing for nearly 3 month, come to an end?
On the supply front, some EMM producers in Guizhou, Chongqing and Hunan, which have low ore self-sufficiency rate and production costs higher than market price, have suspended or cut production after price slid to about 10,000 yuan per tonne. But, no big cuts have been heard in Ningxia and Guangxi, the top two EMM producing regions in China. Hence, production cuts in Guizhou, Chongqing and Hunan have exerted small impact on overall supply, doing little to ease the supply surplus.
On the demand side, many #200 stainless steel mills, one major EMM consumer, reduced production in 1H 2017 due to sluggish price and environmental factor. Recently, those off-line mills have gradually restarted production along with the end of environmental protection inspections and profit-making from rallying price of stainless steel. A small number of them said to increase EMM purchases in August, but most will keep its purchase strategy on as-needed basis.
Meanwhile, some EMM exporters said summer break in major overseas market has cooled down trading sentiment in the export market, and such conditions will not improve until from mild or late August. Even so, overseas buyers will ask for lower price amid the sluggish price in China’s domestic market, and the struggle between them will be a tough one.
To sum up, China’s EMM supply&demand dynamics is developing in a good way, but very slowly, and firm price held by producers will not support price rally effectively. China’s EMM price will not recover until further improvement in market fundamentals.
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