Posted on 18 Jul 2012
Currently, the long-lasting weak demands and the slipping prices of billets deteriorate China’s construction steel price reduction.
According to statistics on July 17, 2012, 6.5mm high speed wire rod and 20mm HRB335 rebar mainstream prices in domestic 28 major markets monitoring by SteelHome averaged at CNY 3984 and CNY 3929 per tonne, down CNY 136 and CNY 145 per tonne separately from that on June 29.
Entering into July, domestic construction steel market welcomed the traditional off season, while the output continued oversupply versus current feeble demands.
Statistics from National Bureau of Statistics (NBS) showed China’s fixed assets investment (exclude farmers) hit 15.0710 trillion yuan in January-June 2012, with an increment of 20.4 percent over prior year.
Meanwhile, the investment in real estate development realized 3.061 trillion yuan in January-June 2012, the norminal growth gained 16.6 percent while dropped by 1.9 percentage points from that in January-May 2012. As a result, the month-on-month drop in investment of real estate development failed to pull up demands for construction steel.
Correspondingly, steel mills in China plan to produce rebar and round bar steel of 13.3155 million tonnes in July, increasing by 270,000 tonnes from that in June, and wire rod and coiled rebar of 7.7411 million tonnes with an increment of 104,100 tonnes from that in June, according to SteelHome.
One trader from Shanghai claimed downstream users now mainly stand on the sidelines with little purchasing sentiments due to the continuous drop in prices, and the transaction volumes keep on shrinking.
Besides, steel mills successively cut ex-works prices, which accelerates the slump of construction steel prices.
Consequently, coupled with the plummeting future and spot prices, traders’ pessimistic sentiments augment gradually.
“the root cause of the continuous price reduction is the oversupply and the market prices have difficulties in rebounding if steel mills maintain high output”, one trader in Shanghai indicated.
On the other hand, the decreasing billet prices make construction steel price hike lost costs supports, and whether the prices can boost mainly depend on downstream demands and output reduction from steel mills.
