MYSTEEL: China's construction steel prices to fluctuate in Dec

Chinese prices of construction steel including rebar and wire rod are likely to lose ground in the first half of December due to inventory accumulation and declines in raw materials costs, Mysteel predicts in its latest monthly report. Prices may bounce back in the second half of this month however, the report suggests.

During November, domestic prices of construction steel items picked up substantially, stimulated by bullish sentiment and solid market fundamentals, the report noted.

For example, as of November 30 the national price of HRB400E 20mm dia rebar, a bellwether of the steel market sentiment across the country, had jumped by Yuan 174/tonne ($24.3/t) from the end-October to Yuan 4,052/t including the 13% VAT, according to Mysteel's assessment.

Last month, domestic mini-mills had enjoyed reasonable profit margins on long steel sales, though the gain in their rebar output contributed little to total production overall among steelmakers, according to the report. By end-November, weekly output of rebar among the 137 steelmakers Mysteel tracks nationwide reached 2.61 million tonnes, lower by 13,800 tonnes on month or down 232,400 tonnes on year, Mysteel's data showed.

China's construction steel production is forecast to decline this month, as steel mills may curtail their output to avoid risks while their production costs remain high, the report indicated. Weekly rebar output among the 137 sampled mills may fall to 2.5-2.55 million tonnes during December, it added.

The report pointed out that long steel demand has weakened significantly since the last week of November, resulting in a rise in total inventories of rebar and wire rod. As of November 30, the stocks of both held by 184 steelmakers and at trading warehouses in the 35 cities both under Mysteel's tracking totalled 6.32 million tonnes, higher by 51,100 tonnes on week.

The accumulation of stocks may increase week by week during December, though just how quickly remains to be seen, the report noted.

Meanwhile during November, the daily trading volume of rebar, wire rod and bar-in-coil among the 237 trading houses Mysteel follows averaged 151,523 tonnes/day, lower by 1.6% on month or down 3% on year.

The report showed of all regions nationwide, spot sales in Northeast China fell the largest last month, falling by a huge 51.1% on month or down 43.8% on year to just 1,179 t/d on average, as the weather turned harsh there with plunging temperatures and strong winds. In contrast, the transaction volume in East China grew by 2.1% from the prior month to average 89,294 t/d in November.

Written by Rong Zhang, zhangronga@mysteel.com

Edited by Russ McCulloch, russ.mcculloch@mysteel.com