Domestic HRC prices in China have increased and are currently assessed at RMB 4,100-4,070/MT (ex-works, including VAT). The same levels were observed in Dec’12. Thus it can be inferred that prices are currently hovering at 4 years and 8 months high.
The factors that have resulted in hike in steel prices are as follows:
Rising production cost – Iron ore, Coking coal and scrap prices have surged resulting in increased cost of production. Iron ore fines Fe 62% index has crossed USD 75/MT, CFR China. Similarly coking coal prices in China have climbed up by 5% M-o-M. Scrap prices are also on uptrend amid steep hike in prices in Turkey.
Boost in steel demand – Domestic steel demand continues to remain strong. As per reports property investments in China have increased ny 8.5% during Jan-Jun’17. And auto sales in China have increased by 3.8% Y-o-Y during Jan-Jun’17.
Upcoming steel production cuts – Last week, Hebei’s provincial government in China will require mills in the cities of Shijiazhuang, Tangshan and Handan to cap steel production at 50% of capacity during November to March. Tangshan – county’s production hub are also expecting to receive orders or stop production for some period of time ahead of heating season over environmental reason.
Increasing shift to rebar production – The steel makers of hot rolled coils and plates are also making rebar as the price of rebar is higher than H-steel because there is shortage of rebar in the country due to elimination of steel made from scrap metals. The increased demand of rebar in the country, made the manufacturing lines change of production from wire to rebar at the maximum capacity. This has resulted in lesser production of flat steel pushing up the prices further.
Hike in steel futures – Another factor that has resulted in price hike in surge in steel futures. The most traded October HRC futures contract was heard to have closed at USD 597/MT. A week ago the same was observed at USD 564/MT.
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