Chinese steel prices have continued to spiral downwards in June, according to MEPS. The average decrease is around 5 percent, month-on-month. The reduction has occurred despite a recent rally in iron ore prices. This situation has accelerated the deterioration in margins, with losses, throughout the supply chain, mounting.
Oversupply continues to exert negative pressure on steel selling values. Demand from downstream sectors has been curtailed by unfavourable weather conditions. This has resulted in only limited transactions taking place in the market. Furthermore, liquidity has tightened due to the approach of the quarter and half year-ends.
The MEPS hot rolled coil dealer price declined by 5.4 percent this month, compared with the figure recorded four weeks earlier. Further reductions are forecast in July.
Steelmakers are attempting to speed up shipments of their products as they fight for market share. They have lowered their list prices for July delivery, amidst a depressed spot market. Traders have also slashed their selling figures. However, the cuts have done little to boost sales because sentiment remains very weak.
Heavy rains and high temperatures have hampered construction activity and, consequently, curbed purchasing of steel products used in the sector. Confidence in the market is lacking and a decline in billet prices has dampened sentiment further. Supply remains in excess of demand.
The MEPS reinforcing bar dealer value fell by 6.5 percent in June, month-on-month. There are few signs that prices are bottoming. As the country enters the off-season for steel consumption, sales are expected to deteriorate and lead to further reductions in prices, in the short term.
Source: MEPS China Steel Review – June Edition