China steel buyers, makers wonder at the tumble

Posted on 31 May 2021

Recent remarks from China’s central government criticising runaway commodities prices have seen prices of most finished steel items lose all the gains they had made during the weeks of steady price escalation, while iron ore prices have also retreated but not by as much. Amid renewed comments on Wednesday from China’s State Council reiterating the importance of commodity market stability, market watchers inside and outside China are keenly waiting to see how much further prices will fall and when they might finally bottom out.

 

After falling for ten consecutive working days, China’s national HRB400 20mm dia rebar price as of May 26 stood at Yuan 5,059/tonne ($792.9/t) including the 13% VAT, lower by a total of Yuan 1,289/t or 20.3% since May 13, according to Mysteel’s assessment. Crucially, that ten-day rout more than offset the Yuan 1,083/t in gains the price had made over May 1-12.

On the other hand, Mysteel PORTDEX 62% Australian Fines in Qingdao was assessed at $178.2/dmt as of May 26, lower by $45.6/t or by 19.5% from its historical high of $233.7/mt reached on May 12. This portside iron ore price had also surrendered all the ground it had gained in recent round of surges and had retreated to the level as of April 30.

“When will (China’s) market stop falling?” a steel trader based in Pakistan questioned. “I am confused as to why prices (are) falling so sharply (when) costs (are) still high,” he said.

Source: Mysteel Data

An official with a mill based in Northwest China said that his company was “barely earning any profits now”, due to the drastic falls in steel prices while raw materials prices including iron ore and coke are proving comparatively resilient.

“Despite our intention to keep steel prices firm, there are still low-priced products circulating in the market. Construction projects need to buy steel, but the contractors always tend to choose suppliers with lower offers, so now, we are still pressured to cut prices further,” he said.

State Council repeats commodity price, supply stability

The tumble in prices since mid-May has not apparently placated China’s central government, however, with senior figures repeating the need for vigilance over prices.

For example, at a meeting on May 26, China’s State Council, the country’s top administrative body, reiterated the importance of guaranteeing supply of raw materials including steel and stabilizing their prices.

The State Council meeting, chaired by China’s Premier Li Keqiang, is held irregularly to discuss domestic or international conditions, and decisions made at the meeting usually become guidance for the country’s later administrative work.

Wednesday’s remark marked the third occasion since May 12 that the State Council had brought up the topic of “commodity prices”, a fact which steel market insiders illustrated “how serious the central government is about the issue,” one said.

The State Council pledged to crack down on “hoarding for speculation” and “bidding up prices,” and promised to help small and micro businesses and privately- or individually-owned firms cope with the surging raw materials prices, according to a government post the same day.

CISA too calls for mills’ self-discipline

Also on May 26, the China Iron & Steel Association (CISA) gathered representatives of its major member steel mills together and pressed them to act with “self-discipline” to guarantee the stable development of the industry, CISA posts showed on Wednesday.

The State Council’s repeated mentioning of runaway commodity prices “shows that the country is paying great attention to the fast rises of raw materials including steel,” Luo Tiejun, CISA’s vice chairman said at the meeting.

The steel industry “serves as the ‘ballast stone’ and ‘stabilizer’ of the national economy (and) an unstable base will affect national economic growth,” he stressed.

CISA called for the orderly development of the steel industry, saying that the recent fluctuations had been intensified by market speculation, “buying when prices are up and selling when prices fall”. This is very unhealthy for the stable development of the industry, the association warned.

Nearly 60 CISA’s members, including steel mills and local industrial institutions attended the meeting, according to CISA’s posts.

Source : Mysteel Global