WEEKLY SUMMARIZATION OF CHINA STEEL MARKET FOR FEB.3-10, 2012

— 14-Feb-2012

(1USD=6.2937RMB)

 

Review

According to China Iron and Steel Association, Steel Association member enterprises' daily crude steel output averaged 1.4822 million tonnes in late January 2012, up 0.5 percent from that of mid-January. China 's daily crude steel output gained 1.6725 million tonnes with an increment of 0.2 percent compared that in mid-January.

In January, crude steel output from Steel Association member enterprises was 1.4838 million tonnes, down by 0.1 percent in comparison with December of 2011, and the daily crude steel output is estimated to be 1.6798 million tonnes, increasing by 1.3 percent month on month.

For the time being, steel prices run at low levels, which suppresses steel mills' output severely. Severe cold weather in North China set back resumption of some construction sites. Besides, sea-ice disaster also hindered transportation of steel. This week, domestic steel market stabilized with slight decline.

As of Feb.9, 2012, SteelHome (China) Steel Price Index (SH_CSPI) closed at 106.52 points, down 0.15 percent week on week.

Forecast

National Bureau of Statistics of China reported 4.5 percent of China 's January CPI growth compared to one year early, and it up 1.5 percent over one month earlier. In the first month PPI grew up 0.7 percent year on year while down 0.1 percent from one month earlier. The growth is mainly supported by the traditional Spring Festival. The nation's efforts to curb commodity price have gradually worked, and the CPI growth will narrow down in the months ahead. China 's monetary policy will continue to be moderately released.

The characteristics of China 's steel industry: Low Production, Low Demand, Low Inventory and Low Price. While in view of sustained growth of China 's economy development, the steel demand will keep the stable upside.

The current annualized crude steel production in China is only 620 million tonnes. Conservatively speaking, the crude steel demand of China in 2012 could only move up around 30 million tonnes, and the net crude steel export will keep stable at 2011 rate. SteelHome predict that China 's 2012 crude steel production may be around 720 million tonnes, at around 2 million tonnes level each day.

Construction steel

China construction steel market head down this week.

China Construction Steel Price Change in Key Cities on Feb.9, 2012

Unit: yuan per tonne	Ф 8mm high speed wire rod	Feb.2	Ф18 -25mm rebar	Weekly change
China average	4301	-39	4231	-30
Shanghai	4190	-30	4130	-10
Hangzhou	4230	-80	4280	-70
Guangzhou	4520	-30	4450	-50
Changsha	4350	-30	4410	-50
Beijing	4120	-10	4090	-10
Tianjin	4110	-10	4060	-10
Chongqing	4550	-100	4400	-80

According to SteelHome survey, the major steel mills in February will arrange 11.58 million tonnes of rebar and round steel production, down 150,000 tonnes compared to January output; the wire rod and coiled rebar production will be around 7.19 million tonnes, that is 30,000 tonnes higher January, with daily growth of 7.4 percent.

The construction steel price performance is restrained by the slow recovery after the Spring Festival and the low semis products prices. The demand, SteelHome predict, will gradually rally on the back of strong iron ore market, the difficulty in low semis products prices and successive startup of construction sites. We see that the construction steel price will stop the falling next week.

Structural steel

The structural steel market keeps stable.

On Feb.9, the 50mm carbon structural steel price averaged at CNY4522 per tonne at 16 domestic key markets, up CNY 4 per tonne in one week; 50mm alloy structural steel price was CNY4772 per tonne, up CNY 3.

The market transactions in part provinces such as Jiangsu and Zhejiang improve. Market inventories do not climb up obviously since the supplies from steel mills are in small quantity.

On February 9, quality steel mills met together in Nanjing city, Mr.Wu Wenzhang, president of SteelHome was invited to deliver a speech on the steel market development forecast. The quality steel mills in the coming week may slightly increase the ex-works prices.

We predict the structural steel price next week will maintain stable, with regional hike.

Medium plate

China medium plate market continues to wake up.

This Thursday, the average price of 8mm plate and 20mm plate in 28 Chinese markets was CNY 4578 per tonne and CNY 4275 per tonne, up CNY 10 compared the previous week.

According to statistics, the global ship orders in 2011 totaled 5896, the valley since 2006. Amid the total orders, newly-signed orders was 1214, down 48 percent from 2010.

From SteelHome's survey, the medium plate mills in February plan the production of 4.31 million tonnes, down 30,000 tonnes; the daily production will grow up 6.2 percent.

We know that part of mills have received the March orders, and the capacity utilization ratio has increased from current low rate.

The medium plate price in coming week will keep stable entirely with regional upsides.   

CR/HR coil

China CR/HR coil price is weakly developing, compared to improved transactions.

China HRC/CRC Average Price at 28 Cities on Feb.9, 2012

Unit: yuan per tonne	Average price	Weekly change
2.75mm HR coil	4425	-5
5.75mm HR coil	4275	-
0.5mm CR plate	5522	-5
1.0mm CR plate	5195	-

We know that major mills in February will arrange 7.22 million tonnes of HR coil production, down 140,000 tonnes compared to the prior month; daily production up 4.9 percent. Meanwhile, the February CR sheet production will be 1.48 million tonnes, down 10,000 tonnes; daily production increases 6.1 percent.

As we investigate, few steel shipments of northeastern steel mills are directed to East China and South China , and current inventory of HR/CR coil witnesses the weakened growth. From next week, Chinese first-class steel giants Baosteel, Anshan Steel, Wuhan Steel etc. will join a wave to release March price direction. We estimate that the steel mills will mainly keep the ex-works prices stable or announce a slight increase.

We predict that the CR/HR steel market price will keep the uptrend amid fluctuation, propped up by the release of demand and the gradual disappearing of low-priced products.

Coated/plated coil

China coated/plated coil market remains stable.

China Coated/plated Average Price on Feb.9, 2012.

Products	Average price	Weekly change
0.5mm galvanized plate	5394	-5
1.0mm galvanized plate	5079	-3
0.326mm color coated	6752	-
0.476 color coated	6335	-

It is reported that China 's January auto production was 1.2994 million vehicles and sales was 1.3898 million vehicles, down 27.47 percent and 26.39 percent respectively compared to one year earlier. The slump is caused by long holiday in January, and the data will move up in February.

As know that major producers in February will arrange 740,000 tonnes of galvanized steel production, down 30,000 tonnes from January; daily production will grow up 3.8 percent. The coated plate production in February will be 60,000 tonnes, almost the same with the first month.

We predict that the major producers Baosteel, Wuhan Steel and Anshan Steel will announce the stable prices of plated and collated sheet. As for domestic market price, we also expect a stable performance in following week.

Strip

Both ups and downs happen in strip market.

By this Thursday, 2.75*235mmQ235 HR narrow strip average price hit CNY4220 per tonne in Wuxi market, down CNY 10; CNY4260 per tonne in Guangzhou market, down CNY 20; CNY3930 per tonne in Tangshan market, up CNY20 per tonne.

Meanwhile, 2.75*235mmQ235 HR narrow strip average price was CNY4248 per tonne at 12 domestic key markets, down CNY 5; 5.5*685mmQ235 HR medium and wide strip average price came to CNY4263 per tonne, down CNY 5 per tonne.

As we survey, the major producers in February will produce around 3.57 million tonnes of HR narrow strip, down 40,000 tonnes from January; daily production will grow 5.8 percent over the daily output in January.

The transactions traded within traders increase, but the orders from strip consuming industry hasn't recovered yet. The inventories continue to climb up.

The traders in East China and South China next week may reduce the prices in a bid to quickly recollect the money.

Sections

China heavy and medium sections prices head down.

China Sections Average Price on Feb.9, 2012

CNY per tonne	Average Price	Weekly change
5# Q235 angle	4393	-18
12-16# Q235 channel	4382	-8
25# Q235 I beam	4478	-12

China H beam Average Price on Feb.9, 2012

CNY per tonne	Average Price	Weekly change
Q235 200* 200mm	4226	-11
400* 200mm	4411	-9
400* 400mm	4675	-10

The transactions of sections are reported low. As we know, the rolling mills are resuming the operations. We expect the section steel market will meet with volatility next week.

(Steelhome)