Steel prices fall in China after government efforts to curb multi-month surge
Industrial equipment is operating at full capacity at a plant of MA Steel Hefei Iron & Steel Co in Heibei, capital of east China’s Anhui Province, on Thursday. The company, which manufactures cold-rolled steel sheet coils for automobiles and household appliances, saw production increase 16.4% in the first quarter of the year. Photo: cnsphoto
Steel prices in China have retreated significantly after months of soaring levels, a trend that is even putting pressure on some companies, especially small and medium-sized businesses in the sector, industry representatives said.
The price cuts came after Chinese authorities launched a new round of measures to curb price spikes in an attempt to ease cost pressures on downstream industries like electronics producers. The measures, while affecting some companies in the short term, will ensure the long-term stability of the steel and allied industries, analysts said.
The steel industry has had a roller coaster weekend with declines in some segments. For example, the price of rebar fell from 20 to 120 yuan ($ 3.1 to 18.6) per tonne in several major national cities, after hitting a new high triggered by a rebound in global demand and a rise in inflation caused by US monetary easing.
The steep declines were the first in months, as the government sought to deter speculation, sending a strong message about how China was doing its part to stabilize the market. Several Chinese steel industry insiders said they expected more price cuts.
A director surnamed Zheng of Hexin Trading, a steel trading company based in Tangshan, north China’s Hebei Province, told the Global Times on Sunday that steel prices fell 10% thanks to the efforts of the government. Zheng temporarily slowed down his trading activities to avoid the risk of a further downturn.
“Without the continued price gains, we may not be able to make money from them, as the price of commodities and stock prices also rise in response to strong demand,” Zheng said.
Zheng said he bought steel at 6,200 yuan per ton and now the price has dropped to 5,700 yuan.
These trends “may have less impact on large steel producers who sourced materials earlier at relatively lower prices,” he added.
Tangshang staff member Rui Peng Xiang Steel Sales, nicknamed Li, told the Global Times on Sunday that average factory prices for various steel products had recently fallen by around 500 yuan per ton, although it did not didn’t say why.
However, she said the drop in prices had little impact on her business operations. “Our prices are changing in response to factory prices,” Li said.
The drop came as market regulators contacted several industry players on Friday about strengthening price management in Tangshan, north China’s Hebei Province, and Shanghai, the latest attempt to ease the pressure. on costs on downstream companies and preserve market order.
It was part of a series of efforts to ease prices, after stock exchanges – including the Shanghai Futures Exchange – adjusted margin requirements and transaction fees to curb speculation.
A meeting of the executive of the State Council, the Chinese cabinet, also called on Wednesday for effective market adjustment in response to the excessive rise in commodity prices and its associated impact, the news agency reported. Xinhua.
The efforts had an immediate effect, contrary to some media reports claiming that China was passing the higher costs on to overseas customers, industry experts said.
Although the price restrictions have had an impact on some players in the steel industry, industry representatives told the Global Times that there is a need to stabilize the market.
Analysts said there was also room for further price cuts; however, despite great efforts by China, cooling world steel prices requires a joint international effort.
The global market expects increased inflationary pressure from multiple factors, including U.S. monetary easing and market speculation, Wang Guoqing, research director at the Steel Information Research Center, said on Sunday. from Beijing Lange, to the Global Times, noting that prices are rising faster in the country. West than in China.
The price of steel in the United States is as high as 10,000 yuan per ton, compared to around 6,000 yuan in China, because the steel supply cannot keep up with the recovery of the US manufacturing industry, said the ‘expert.
Another cause of the steel price surge is the high price of imported iron ore, monopolized by some global suppliers, including the Anglo-Australian mining company Rio Tinto Group. Chinese authorities have also taken steps to curb the surge in iron ore prices, including by diversifying sources of supply.