WEEKLY SUMMARIZATION OF CHINA STEEL MARKET FOR FEB.10 - 17, 2012

— 21-Feb-2012

(1 USD=6.2938RMB)

Summary

In January, China imported 0.92 million tonnes of steel products, down 0.28 million tonnes or 23.3% month on month and exported 3.73 million tonnes of steel products, based China Customs.

Crude steel supply in China totaled 49.1 million tonnes, down 15.9% year on year, based on data from China Customs and China Iron and Steel Association.

Steel Products Import and Export in China in January

In Million Tonnes	Steel Product	Change (YoY)	Change% (YoY)	Change (MoM)	Change% (MoM)%
Import	0.92	-0.72	-44.1%	-0. 28	-23.3%
Export	3.73	+0.62	+19.9%	0	0
Net Export (Crude Steel Equivalent)	2.97	+1.48	+99.5%	+0.31	+11.7%

Chinese steel market has seen consecutive declines in construction and sections and relatively stability in plates this week.

As of February 09, SteelHome (China) Steel Price Index (SH_CSPI)closed at 105.37 points, down 0.84% from prior week.

Forecast

Chinese economy is slowing down. According to data from central bank, M1 and M2 at the end of January posted new low since 2005 while bank loans hit the lowest since 2009; According to the General Administration of Customs, China 's exports dropped 0.5 percent year-on-year to 149.94 billion U.S. dollars in January, the first decline in more than two years.

In response to economic turmoil, Premier Wen suggested that the government should fine-tune its macroeconomic policies in a timely manner, and that Chinese government should also better handle issues related to living standards, tackle unfair income distribution and corruption, and address public concerns about inflation and the affordability of housing.

We think it a normal reaction when crude steel supply fell this month amid weak market and that Chinese demand will gradually step up with macro support measures coming up. It’s way too pessimistic if we overrate the slackness.

Construction steel: Construction steel prices continued downtrend in China in this week.

China Construction Steel Price Change in Key Cities on February 16, 2012

Yuan per tonne	Ф 8mm high speed wire rod	Weekly change	Ф18 -25mm rebar	Weekly change
China average	4210	-73	4160	-57
Shanghai	4050	-120	3980	-130
Hangzhou	4040	-150	4140	-110
Guangzhou	4380	-100	4320	-100
Changsha	4160	-160	4240	-160
Beijing	4080	-30	4060	-30
Tianjin	4100	-10	4050	-
Chongqing	4400	-130	4350	-50

Rebar stocks in China has posted new high, as demand recovery process is longer than we expected and construction steel production remains higher ever after a sharp cut-down since October of last year. Given this situation, we expect the decline pace in China ’s construction steel market to remain in place but be slower than last week.

Structural steel: The structural steel market was steady amid a quiet market in China this week. On February 16, 50mm carbon structural steel averaged CNY4512 per tonne at 16 major Chinese markets, down CNY 2 per tonne from last week; 50mm alloy structural steel price averaged CNY 4769 per tonne, flat from last week.

Although market trading was thin this week, SteelHome noticed market stocks were fairly reasonable.

We expect structural steel prices to remain steady next week.

China’s auto production in January reached 1.2994 million units, down 23.2% month on month or 27.47% year on year; auto sales reached 1.3898 million units, down 17.75% month on month or 26.39% year on year, based China Association of Automobile Manufacturers.

Medium plate: Medium plate market slightly gained this week. On February 16, 8mm plate and 20mm plate in 28 major Chinese markets averaged CNY 4584 per tonne and CNY 4283 per tonne respectively, up CNY 9-10 from last week.

Medium plate supply in Northern Chinese market fell down due to reline at Tianjin Steel, Anyang Steel.

SteelHome expect medium plate to remain steady next week.

The gross value of machinery industrial output in China came at 1.689 billion yuan in 2011, up 25.06% from last year, according to data from National Bureau of Statistics. For 2012, production and sales of Chinese machinery industry is expected to grow 18% year on year, said China Machinery Industry Federation.

CRC/HRC: Major HRC markets in China , including Shanghai , Tianjin , Wuxi , Guangzhou and Chongqing , declined CNY 20-40 per tonne this week while CRC markets hold steady outside East and Southwest China where prices dropped CNY 20-30 per tonne.

China HRC/CRC Average Price at 28 Cities on Feb.16, 2012

Yuan per tonne	Average price	Weekly change
2.75mm HR coil	4407	-12
5.75mm HR coil	4259	-12
0.5mm CR plate	5522	-5
1.0mm CR plate	5188	-6

China’s Baosteel and Wuhan Steel raised March HRC/CRC price by CNY 100-150 per tonne and we expect other steel mills to follow the pace and to raise HRC/CRC prices as well.

We don’t see much more declines ahead in the material, as HRC production in China is now flat or properly slightly lower from last year following a largely focused production cut-down on hot rolled products. Although HRC inventories rose mildly post Chinese new year festival, the pace was much slower compared to the same time of last year.

SteelHome expect HRC/CRC prices to be steady in China next week.

Coated/plated coil: Chinacoated/plated coil market remained stable this week before any apparent improvement in downstream demand and a break from cautiousness in traders. Currently SteelHome noticed a remarkable pressure on private steel mills and production cutbacks in major steelmaking manufacturers.

China Coated/plated Average Price on Feb.16, 2012.

Products	Average price	Weekly change
0.5mm galvanized plate	5394	-
1.0mm galvanized plate	5079	-
0.326mm color coated	6752	-
0.476 color coated	6335	-

China’s Baosteel and Wuhan Steel raised or stabilized their March coated or painted price this week.

SteelHome expect coated/plated prices to be steady in China next week.

Strip: Chinastrip market had a slight fall this week. on February 16, 2012, 2.75*235mmQ235 HR narrow strip averaged CNY4214 per tonne at 12 domestic key markets, down CNY28 per tonne over a week earlier; 5.5*685mmQ235 HR medium and wide strip averaged CNY 4243 per tonne, down CNY14 per tonne.

China 2.75* 235mm Q235 HR Narrow Strip Prices on Feb.16, 2012

Products	Average price	Weekly change
Wuxi	4170	- 50
Guangzhou	4150	- 110
Tangshan	3870	- 30

Welded pipe stock in China is rising before a recovery in construction market.

SteelHome see a decline trend with relative stability in Chinese strip market.

Heavy and medium sections: China heavy and medium sections and H beam market continued to move downward this week.

China Sections Average Price on Dec. 16, 2011

CNY per tonne	Average Price	Dec. 15 VS Dec. 8
5# Q235 angle	4374	-11
12-16# Q235 channel	4370	-4
25# Q235 I beam	4463	-10

China H beam Average Price on Dec. 16, 2011

CNY per tonne	Average Price	Dec.15 VS Dec. 8
Q235 200* 200mm	4205	-14
400* 200mm	4393	-11
400* 400mm	4657	-15

Small and medium sized section prices in China are relatively high in China and a low semis market helps support rolling.

China heavy and medium sections market is expected to fall slightly next week.

(SteelHome)