Domestic steel market extended losses last week. The prices of the major steel varieties broadly saw sharp falls early last week, while drops eased later, with the prices of construction steel in part areas even rising slightly. However, traders still held pessimistic sentiment toward the short-term market.
In global market, World crude steel production for the 62 countries reporting to the World Steel Association (worldsteel) climbed by 2.0% y-o-y to 130mln tonnes in Jul; The Markit Flash Eurozone PMI Composite Output Index was broadly unchanged at 46.6, declining for 7th straight month; Goldman Sachs said in a report Wednesday that Spain is likely to seek a full bail-out to avoid default some time after mid- Sep; US new home sales rose 3.6% in Jul from Jun.
In domestic market, The preliminary HSBC China Manufacturing PMI fell to a nine-month low of 47.8 in Aug, marking the 10th straight month the index has been in contraction territory; The State Council required to remove 48mln tonnes of iron-smelting and steel-making capacities respectively in 12th Five-Year Plan during 2011-2015; China’s State Council reiterated the government will continue its strict controls over the housing market; Average housing prices in 70 Chinese cities covered in a government survey rose at faster pace in Jul, recording a second consecutive month of mild gains.
MyspiC (short for Mysteel price indices of China) stood at 130.5 on Aug 24, down 1.92%from last week; MyspiC for flat products came at 114.8, down 2.05% from last week; that for long products arrived at 148.6, down by 1.81% w-o-w.
I. CONSTRUCTION STEEL:
By Friday last week, 20mm HRB 335 rebar averaged 3626 yuan/tonne in China’s 25 major cities, down by 66 yuan/tonne from one week ago; 20mm HRB400 rebar averaged 3748 yuan/tonne in the major domestic markets, down 68 yuan/tonne; 6.5mm Q235 high-speed wire rod was 3681 yuan/tonne, down 75 yuan/tonne w-o-w.
Construction steel market continued trending downside last week, with prices in major markets like Shanghai, Tianjin and Guangzhou all slumping, while that in Fuzhou, Bejing, Shenyang and Harbin all plunged by more than 100 yuan/tonne. However, drops eased in the past two days, with prices in part markets in North China even edging up slightly on Friday of last week. However, bearish sentiment still dominated the market.
Downstream demand remained sagging, and the market bottom continued moving down. In addition, falls in raw materials prices accelerated last week, weakening the support to steel costs. Besides, traders usually fact tight funds at the end of the month, while credit crisis of the steel trading industry caused by repeated pledge continued fermenting. Furthermore, the State Council reiterated last week that the government will continue its strict controls over the housing market. Therefore, it is unlikely that demand in construction steel market will see substantial improvement soon.
It is predicted that construction steel market may continue weak trend amid fluctuations in the near term.
II. HR Sheet/Coil:
By Friday, 3.0mm HR coil in major domestic cities averaged at 3677 yuan/tonne, down by 90 yuan/tonne w-o-w; 4.75mm HR coil at 3567 yuan/tonne, down by 93 yuan/tonne from one week ago.
Drops in HR market deepened last week as market transactions continued shrinking, with prices in the major markets like Shanghai, Tianjin and Beijing plummeting by 100-140 yuan/tonne. Major steel mills have released their price policies for Sep shipments, again slashing the ex-w prices, which, although was in line with market expectations, imposed great pressure on the spot market.
Due to the bleak downstream demand, trading activities were sporadic. Aug is the traditional off-peak consumption season, while production cutbacks at the mills remained limited, plus the persistently sliding raw material prices, it is expected that weak trend in HR market is hard to change in the short run.
III. CR Sheet/Coil
By Friday last week, the average price of 1.0mm CRC stood at 4471 yuan/tonne, down by 55 yuan/tonne one week ago.
CR market continued declining last week, with the prices in some cities even tumbling by more than 100 yuan/tonne. The lowest price continued to be in Tianjin at 4000 yuan/tonne, a w-o-w dive of 140 yuan/tonne; while the highest came at 4850 yuan/tonne in Taiyuan.
Steel mills have basically unveiled their price policies for Sep, sharply cutting the ex-w prices of the major products, meanwhile, offering subsidies for the clients ordering steadily, which dragged down prices in the spot market.
Demand in the home appliance market saw no significant improvement in Aug, while auto production and sales bounced back slightly. However, the overall downstream demand remained unoptimistic. Furthermore, the prices of raw material like iron ore and billet continued sliding. Therefore, it is likely that CR market may fall further in the near term.