Steel Price Movements: Will Chinese weakening prices affect prices in SE Asia?

Posted on 28 September 2009

Source: SEAISI
Steel demand continued to improve in many regions of the world since July. Developing countries, in particular, are enjoying improving real demand, especially in Asia and Middle East. China's domestic demand was very strong in July, but signs of weak demand started to appear in August. Inventory levels in China began to build up since August. Inventory levels in September are expected to remain high, resulting in a continuous fall in steel prices in the country amid steel prices moving upward in other regions.

It is reported that long product prices in US and Europe have remained steady. This is despite the fact that demand is still weak and is not expected to improve significantly for the rest of the year. World Steel Association has reported a continued increase in average long steel prices. The average billet and slab prices picked up from the lowest record in June 2009 at 375 USD per tonne and 318 USD per tonne respectively, to 448 USD per tonne and 413 USD per tonne respectively in September 2009.  Price of reinforcing bar showed a slight increase from 405 USD per tonne in the second quarter of 2009 to 425 USD per tonne in the third quarter and picked up to 438 USD in the second week of September. The increases could be attributable to the pick-up in prices in Asia and Middle East. It is expected that long product prices in Asia will probably stabilize after the increase in September. Middle East purchasing may resume after Ramadan, but the upturn is expected to be modest.

Meanwhile, hot rolled wide coil price remained relatively unchanged at an average price of 465 USD per tonne since April 2009, after falling from 488 USD per tonne in March 2009. The price picked up recently in the second week of September to 485 USD per tonne. This may be a result of significant price increases for flat products in early September in US and Europe which are being driven by the producers. The producers of flat products are expected to seek to retain their recent price increases during September.


Steel demand in China appeared to be very strong in the beginning of the third quarter of 2009. This has resulted in a significant pick-up of steel prices in the country. There have also been significant speculative stock building activities in the country. The recent decline of steel demand in late August onwards as well as high inventory levels have pushed down domestic steel prices. Rebar price went from 4285 Yuan per tonne in the first week of August to 3405 Yuan per tonne in September 2009. Hot rolled wide coil price also declined to 3570 Yuan per tonne in September, after the strong gain to reach the peak of 4270 Yuan per tonne in early August in the same year. It is expected that reduction in steel prices will continue to take place till October. Baosteel announced a 6% price cut for its major steel product for October sales while production remained high. Wuhan Steel Group, China's third-largest steel mill, is cutting its list prices by up to 400 Yuan per tonne for October bookings.

Domestic steel prices apparently reflected export prices from China as well. Export rebar price registered 523 USD per tonne in the second week of September 2009, a drop from 625 USD per tonne in the second week of August in the same year. HRC export price declined from 605 USD per tonne to 535 USD per tonne in the same period.

Source: Metal Bulletin

For South East Asia, many buyers are expecting that the weaker Chinese market and price drop would influence steel prices in the region as well. Steel Business Briefing (SBB) reported that many buyers in SE Asia have begun to hold off purchasing in anticipation of lower prices. However, SBB expected the long product prices in SE Asia to move higher again in September, especially if scrap prices rise. However, the price increase may not be sustained since demand for long products is usually slower in the coming months.

On the other hand, flat product prices in SE Asia have been decreasing since August 2009 with HRC prices falling by 40-50 USD per tonne. This may be a direct impact of Chinese export prices which have declined dramatically. While export volume from China has remained low so far this year, it is expected to increase strongly in the fourth quarter of 2009.

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