Chinese Steel Future Moving up Upon Price Hike by Steel Majors

BEIJING, June 18 -- It is reported that steel mills are pushing up ex-works prices one after the other these days in anticipation of prosperous steel market and growing demand, fueling steel futures constantly moving up.

    Market players cautioned that the swelling steel production triggered by hiking prices will bring pressure on the market prices in return in the coming July to August low season for steel consumption, and might lead to a mild adjustment.

    Statistics shows that Baosteel raised its ex-works prices for July deliveries in its price policy issued June 11th with HR products to be raised CNY 400 per tonne in general, CR, CNY 200 per tonne and pickling, galvanized and colored electrical steel, CNY 200 per tonne to CNY 500 per tonne.

    On the same day, Hebei Iron & Steel Group added CNY 50 per tonne to CNY 100 per tonne to its main products. Fujian Sangang Group also scaled up CNY 50 per tone for the ex works high speed wire rod and CNY 30 per tonne for deformed steel bar. Similarly, Shagang ups its deformed steel bar, wire rod and coil rebars prices by CNY 70 per tonne. Afterwards, more mills are following on the same line.

    Fueled by steel mills' physical movement in price adjustment, steel future price has been gaining without a break. Shanghai Future Exchange witnessed a sharp low opening in early trading of Jun 16 for wire rod future 0909 at CNY 3738 per tonne then a constant upswing and a closing at CNY 3782 per tonne a hike of CNY 28 per tonne from the previous trading day.

    An analyst said these price rises, reflecting the comprehensively low market in the Q1 are backed up by the reviving demand in the Q2 as the traditional high season. Having encouraged by the rising steel ex works prices and futures as well as an anticipation of inflation, traders are not willing to drop prices despite terribly slim deals.

    Mr Tang Junbo analyst from UBS Securities said "Demand once again dominates the market." The strong domestic demand has completely offset influence of weakening overseas demand since the start of this year, which owes to the government record stimulus investment in infrastructure constructions.

    Data shows China’s steel products imports mounted up to 2.35 million tonnes in May gaining 3%MoM or 73%YoY while at the same period, exports declined to 1.35 million tonnes loosing 4%MoM or 76%YoY. That means 1 million tonnes of net imports of steel products, breaking the record high since 2005 October.

    However, steel mills' outputs are also swelling following the market growth. Statistics shows that the productions of pig iron, crude steel and steel products in May hiked 6%, 0.6% and 7.4% respectively to 45.426 million tonnes, 46.46 million tonnes and 57.291 million tonnes. The figures are further creating new highs as of June.

    Yet, there has been a fidgeting sentiment in the market facing resolute gaining of steel prices and production. The increasing inventory lets insiders worrying about the market will not prove to be as firm as it looks like. The steel industry which has already gone through a cycle of price rise, capacity expanding and price drop in this February took so long time for it to recover from the impact and is believed to follow the same road to an increasing extent upon the soaring production.

    Mr Yu Mengguo vice president of Jinpeng Future believed it is expected that daily production of crude steel will continue going up in June especially that of steel plate, hopefully to be pushed up further in a wake of the newly expanded capacity coming on stream. Given the appending low season for steel consumption in July to August term steel prices may be adjusted slightly under the pressure of oversupply.

    (Source: Securities Times)