China Steel Industry Price Trends and Stimulus Effects

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Ferrous Metals, Global Trade

Two recent stories highlight China’s steel industry stimulus plan to minimize inefficiencies and help larger producers get bigger and smaller ones to consolidate or close in an effort to gain leverage with raw material suppliers and improve productivity. The Chinese government has created a multi-prong strategy to do so. Various efforts include the specific support of Baosteel Group (parent of publicly traded Baoshan Iron & Steel), Anben Iron and Steel and Wuhan Iron & Steel to be the three biggest players in the industry each producing 50 million metric tons or more a year within three years. Another aspect of the stimulus plan calls for these three producers to make up 45% of all Chinese steel output by 2011. Industry fragmentation, weak demand and a glut of material have pushed prices lower. The government also plans to modify various import tax schemes and increase VAT rebate rates as we have previously reported here.

One area that has received scant attention, due to lack of visibility and transparency involves actual global steel prices, the rate and size of price declines. Just yesterday, Brazilian steel producer Companhia Siderurgica Nacional reported strong results for the most recent quarter, but noted steel consumption has dropped by 17% and sluggish international demand and reduced domestic consumption resulted in cutbacks in Chinese production. Moreover, falling prices forced the less efficient steelmakers to close their doors, Companhia Siderurgica Nacional said.

So what does the decline look like? Examining our own historical MetalMiner IndX(SM) data for China produced CR sheet and coil, we see the bulk of the drop occurring between July and October of last year (no surprise). Prices dropped $3070/ton for CR coil and $2550/ton for CR sheet:

Source: MetalMiner IndX(SM)

It appears as though prices have bottomed. Perhaps the Chinese stimulus package is starting to take hold. China rebar prices on the other hand dropped less in absolute terms ($2080/ton) but the trend line has yet to flatten.

Source: MetalMiner IndX(SM)  

Regardless, readers can check in for daily market pricing for China, Japan and India via MetalMiner IndX(SM) here upon registration. If you are interested in accessing historical price trend information, drop us a line with your contact info at: lreisman (at) aptiumglobal (dot) com.

–Lisa Reisman

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