Steel prices in China have been falling since past two weeks amid domestic market weakness. In past two weeks, country’s domestic steel prices have fallen by RMB 70-75/MT (USD 10-12/MT) whereas HRC export offers have registered a fall of USD 20-25/MT.
After the mid-Autumn holidays in latter half of previous week, Chinese steel market opened today with further fall in country’s HRC export offers by USD 5-10/MT. Current offers for HRC (A36) are being heard at USD 380-385/MT, FoB China basis.
The Chinese government had announced credit stimulus package in the beginning of 2016 in order to push steel demand in the country and to subsequently deal with its problem of overcapacity in the steel industry.
This led to the boost in country’s liquidity, thus driving consumers to make investments in housing sector. The rise in demand in realty sector especially in tier II cities resulted in drastic surge in average home prices in the country by 70-75% in Aug’16 against corresponding month of previous year.
The Chinese policymakers had expressed concerns over mounting debts from an over-inflated property market, while economists urged for more steps to curb the flow of capital into the property market.
In order to deal with this issue, the housing authorities in eastern city of Hangzhou announced its initiatives to restrict home purchases from today i.e. 19 Sep’16.
As per the new rules imposed families who are not registered as residents and already own one or more houses in certain districts will not be able to purchase another home, new or pre-owned.
With quite a big supply of steel in the country, these new restrictions in housing sector has put demand for steel in China at higher risk thus weakening metal’s prices in the country.
*Sep’16: Three weeks price average
Source: SteelMint Research
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