Steel futures prices on the Shanghai Futures Exchange (SHFE) softened over the week of September 7-11 as market sentiment turned weaker. Steel consumption has failed to improve to the extent that the market had expected over the busy season over September-October, fuelling trepidation about future trends, Mysteel Global understands from industry sources.
Over September 7-11, the most-traded rebar futures contract on SHFE for January 2021 delivery declined by Yuan 89/tonne ($13/t) on week to Yuan 3,655/t while the most traded contract for hot-rolled coil, also for January, declined more sharply by Yuan 131/t on week to Yuan 3,779/t, according to SHFE’s weekly performance report of each product. Both prices include the 13% VAT.
“The optimism about the pickup in demand in September was too strong, and now that such a rebound has not eventuated as expected. This is weighing down the overall sentiment,” a Shanghai futures steel analyst observed.
“We heard that domestic construction restarts after last month’s floods (were) slightly disappointing,” an analyst with a UK-based research institution also noted.
Mysteel’s daily survey across 237 Chinese steel traders showed that their transaction volumes of rebar, wire rod and bar-in-coil averaged 213,352 tonnes/day over September 7-10, down 7.5% on week. The average was just slightly above the 200,000 t/d threshold, indicating that trading was average and far below the 230,000 t/d level seen over the previous busy period in April-May.
There have been growing concerns in and out of China this week that the steel market may continue to trend downwards, with some pundits even starting to worry about the overall demand in the current half year. However, most market insiders quizzed by Mysteel Global maintained that the recent retreat was a “short-term correction”.
“There are no more new driving forces. I felt that the upward impetus in both the futures and equities markets is receding, which might be due to capital issues. The government’s fiscal stimulus policies for this half might not be as easy overall but could be more targeted,” another steel futures analyst based in East China’s Shandong province observed.
“This (the steel price decline) is only temporary. It won’t be bad. All industries continue to rebound strongly. There is no reason to believe that the steel market will be an exception,” a source from a steel mill in North China’s Hebei province maintained.
Last week, the most-traded futures contract for iron ore on Dalian Commodity Exchange for January also headed down, but by a smaller Yuan 12/t to Yuan 837/t as of September 11.
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
Photo: World Steel
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