Steel Prices in China Facing Downward Risks after Long Rise

BEIJING, July 10 -- Steel prices in China have rallied for a twelfth week in a row by the end of last week however, market insiders warned that price falling risks would increase in July, the traditional low season for steel consumption

    Steel prices have undergone a wave of correction since the beginning of last week, however, it moved up again stimulated by the releasing of ex-works pricing policy for July. Steel mills in China have successively raised ex-works prices. And Baosteel, the top steelmaker, lifted up prices for some products for August after price gains in July.

    By July 3rd, China's benchmark steel price index stood at 94.3 up by 0.49% from the week before or up by 2.84% from the previous month. In detail, price for long products rose again after restraining. Construction steel products experienced a small-sized correction on last Monday, June 29th then advanced again amid fluctuations.

    Prices for high-speed wire rod and rebar increased by CNY 20 per tonne to CNY 60 per tonne by June 3rd from the end of the previous week in Chinese major cities like Shanghai, Guangzhou, Tianjin and Chengdu.

    Analysts said the ex works price rise was mainly driven by costs. Steel mills raise prices to prepare for a possible below-expectation price cut for iron ore in future. And the size of the rise is small and tentative. However, the long run price uptrend might incur corrections as the low steel season kicks in. Hot weather and plum rain would slow down construction activities and cut demand. Meanwhile, the excessive supply and piling up stocks also weigh on steel prices downward, market participants warned. And the current price rise stems mainly from iron ore price talks and the government's CNY 4 trillion economic stimulus packages.

    Steel mills in China have suffered pressure of overcapacity since the start of the year. According to latest statistics released by China Iron & Steel Association, China's steel output hit 1.522 million tonnes per day in June 11th to 20th the highest daily output this year and is equivalent to an annual production of 555.5 million tons more than 10% above 2008 output of 500 million tonnes. Furthermore, the low exports also arrest domestic steel price rise.

    (Source: China Metallurgical News)