The volume of rebar and wire rod being transported to buyers in South China’s Guangdong province this month by the 12 steelmakers in North and Northeast China monitored by Mysteel is forecast to reach 305,000 tonnes, higher by a huge 96.8% compared with deliveries in October, according to a new Mysteel survey published on Tuesday.
But survey respondents cautioned that the usual winter migration of northern longs to the warmer climes in southern China will face more market obstacles this year than in previous years and the volume of longs arriving would be lower too.
Every year at around this time as falling daytime temperatures in northern China slow progress on outdoor building projects, construction steel makers and traders in North and Northeast China usually try to keep their business ticking over by sending their long steel products to markets in South and East China where the weather is warmer and building work is steady.
This year, however, the trade must navigate several obstacles, namely the narrowing spread in prices for longs at opposite ends of the country, the reduced consumption of long steel – and increased supply – in the huge and valuable Guangdong market, and resistance among local traders in South China to stocking up products due to unfavourable industry conditions there, according to the survey.
By way of comparison, the total volume of long steel products delivered by mills in Northeast China to other regions including East China, South China and the Beijing-Tianjin area during 2021 reached 13.04 million tonnes, according to Mysteel’s survey of 14 rebar producers and 12 wire rod and bar-in-coil producers.
Of the impediments facing the traffic this year, the narrowing of price gaps between the northern and southern regions over the past few years is probably the largest and the one cooling the interest of the mills in Hebei, Liaoning and other North China production hubs in shipping steel southwards, Mysteel Global notes.
As of November 7, the price spread of HRB400E 20mm dia rebar between Guangdong’s provincial capital of Guangzhou, and Shenyang, the capital of Northeast China’s Liaoning province, was Yuan 220/tonne ($30.3/t), narrowing by Yuan 260/t from the same period in 2019. Similarly, the gap between prices in Guangzhou and in North China’s Beijing for the same product was Yuan 340/t by November 7, lower by Yuan 170/t from the same period two years earlier.
The survey report also noted that the number of newly-launched property projects in Guangdong has declined compared to prior years, and steel consumption from end-users has fallen accordingly. These days, the sullen steel market and bearish sentiment are leading building contractors in Guangdong, Guangxi and other southern provinces to mainly procure steel products just to fulfill their immediate demand.
Mysteel’s survey among 20 trading houses in Guangzhou showed that their daily trading volume of construction steel including rebar averaged 18,035 tonnes/day during October, lower by 7,124 t/d on month and by 1,690 t/d lower on year.
“If large quantities of North-produced longs arrive in Guangzhou, the lower steel consumption in the city will mean that the local market won’t be able to fully digest them and stocks of unsold steel may accumulate,” a survey respondent said.
Another Mysteel survey among ten trading houses in Guangzhou revealed that only two were interested in buying steel products from northern areas, as traders remain rather cautious due to shrinking demand, their tight cash flow situation currently, and the depressed steel market this year. The survey also found that the ongoing upsurge in COVID-19 cases in Guangdong province is adding more uncertainties to the market outlook there.
Written by Rong Zhang, zhangronga@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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