Chinese Steel Price Surge Extends to Week 5

Resource from: CBCC Likes:2956

Aug 26,2010

Contrary to the expectation of many people, the price surge in Chinese steel market has extended to the fifth week. The composite index of steel price released on August 24 is 155.1, up by 0.5% compared to last week. From the perspective of the general economic trend of China, market demand for steel products will maintain stable development. However, the oversupply problem still exists, therefore it is believed that the surge can’t be very huge. And shocks are unavoidable either. According to relevant monitoring report, after the construction steel price reached CNY 4100 per tonne to CNY 4200 per tonne and the steel futures price reached CNY 4200 per tonne, there have been no further rise ever since. Clearly the surge has not enough momentum. Besides, although prices of most steel species are increased due to the effect of price rise by the three steel majors Baosteel, Angang steel and Wugang steel, prices have fallen back to the original level in the end of last week for the above mentioned steel species. The price rebound for steel products have lasted for more than one month and the reaction by downstream industry has been far from good. On one hand, it proves that the downstream demand is not rigid; on the other hand, it means the downstream demand needs longer time to be released. As to the trend of steel price in the second half of the year, market opinions are largely the same: steel demand will increase stably, but the recent surge will not be huge. The judgment is quite reasonable, as it takes the general economic trend of China into consideration. Demand increased of steel products is mainly because of some large scale investment plan initiated by the Chinese government.

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