Traders Warn to be Cautious in Future Steel Market

SHANGHAI, May 8 -- It is reported from the 2009 5th Shanghai Tube Exposition held recently that, the spot traders and consumers remain cautious in the participation of the future market on the recent steel prices rally, and they all believe the market will in deed revive as long as the prices keep in a reasonable level.

    A principal from one stainless steel pipe company in Changzhou said the prices are lofty high, and we can not gain export orders at all. Price reduction may cause cost loss.

    The principle said the company was engaged in export business before, but shifted into a stagnant pattern due to the financial crisis last year. On the other hand, with the increasing raw materials prices, the domestic steel billets are quickly to hike in recent several months, leading the company gradually to lose the export competitiveness.

    They may suspend the production without any new orders on current 50% operating rate and more than RMB 100,000/day production cost.

    Different from the export industries, the enterprises with sales in domestic market are more stable in face of the materials rise. As learned, the enterprises work for large infrastructure construction project are comparable optimistic.

    It is known from the exhibition representatives from Hebei Zhonghai Steel Pipe Manufacturing Co Ltd that the company has gained government investment projects with full production at present, which may cancel out the export losses.

    While, the other mills reflect the pipe demands in West-East Gas Transmission and Oil Pipeline Steel Projects remain stable all the way, especially the projects with fastest growth rate are government investment railway and bridge constructions nowadays.

    So, they wish the price of raw material stay in a reasonable place without the large vibration under the lower profits at present. Many insiders hold the view the future market is unlikely to edge up by large amounts.

    Nevertheless, to sum up, the market seems to turn better anyway. As per the statistics issued by China Federation of Logistics & Purchasing on May 1st, some periodical industries, like steel industry etc has showed a continuous rebounding sign in their revenue of new orders, and April puts on a better performance than that in March.

    Moreover, the major steel products posted a continuous upswing trend in past one week. In specific, the construction steel product in Beijing, Tianjin and Shenyang etc is up RMB 100/mt; the medium plate presented a slightly uptrend in Chongqing and Chengdu etc by RMB 50/mt and small amount upswings in Beijing, Tianjin and Fuzhou etc CRC/HRC markets by some RMB 100/mt in some thick gauge products.

    Analysts point that the one falls and other rises phenomenon in inside and outside demands won't create a material change in the recent market pattern. So, what needs to pay more attention is whether the supportive elements can postpone or not when facing the price hikes at the moment.

    On Monday this week, impacted by the pick-up of PMI and the inefficient capacity elimination task by NDRC, the domestic steel prices once nosed up, including steel rebar and wire rod surpassed 2% growth but erased most of the gain at the closing time.

    (Source: Securities Times)