AFTER 16 consecutive weeks of gradual steel product price rises, the per-ton price suddenly shot up by 300 yuan, which can only be described as “irrational behavior,” before just as briskly falling precipitously.
This is a very unsettling situation for both buyers and sellers of steel alike. In the past seven days alone, prices per ton for some steel products fell by up to 600 yuan, with others returning to levels seen in the less heady early-month period.
In synch with the recent price hikes for steel, there has been commensurate support for a strong spot price for iron ore, something not seen for some time and giving traders flexibility to move prices for the raw material around more drastically.
However, this upside driver stick around for long, and trade in iron ore weakened since. As one market expert said: “There’s not a lot of major upside for steel left in the tank at this point, which holds out hope that the price will be determined by real, on-the-ground actual supply and demand conditions. It is even more incumbent upon the domestic iron and steel industry to both implement and practice a system that allows these products to be sold in a more rational, market-based environment.”
What goes up…
The first two weeks of August saw the domestic steel product market enter a brief period of fuselage-shaking price turbulence. The spot, finished and futures markets for steel and iron ore all rose red-hot as one, then a week later these same players all witnessed prices fall in tandem, with futures taking the biggest dive of all.
According to the influential industry journal Mysteel.com, the past week has for now put an end to the continuous steel price ascent and ushered the 16 week non-stop increase into the annals of history. The gradual declines now dictating the market have cumulatively totaled some 500-600 yuan per ton for some product categories.
Among the hardest hit was construction-use steel, which saw the most humbling return to pre-frenzy price levels. Among categories that fell by over 400 yuan per ton in urban areas were: medium-thickness plate steel which saw more modest declines, cold-rolled coil and thick plate.
According to analysts, all construction-use steel has weakened over the past week by a considerable degree.
Within the given timeframe, among 60 domestic makers of steel thread, around half have since adjusted their ex-factory prices downward to meet the market halfway, whereas those who didn’t were punished by the market. And during the rapid price falls, trading volume was also clearly impacted.
A fair number of mills were using a “protect prices policy” while also looking to move some of their accumulated inventory from the last cycle out of their warehouses.
But no matter from what angle the market for construction-use steel and demand for such products is surveyed -- the situation has surely reached a state of potential stagnation, and oversupply will continue to be exacerbated.
And those companies acting on a hoped-for resurgence in prices anytime soon with planned output increases will find themselves having to execute painful adjustments down the road.
