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Analysis of Current Market Situation in China

Release date:2016-07-14 Clicks:7 Font display:【Large】  【Medium】  【Small】

The future price of rebar rose up sharply recently, because of expectation about accelerated reducing of steel production capacity and RMB devaluation. Considering there’s less than 3 months from current main contract time to delivery month, and the obvious premium of futures over spot, the desire of hedging for mills will be significantly enhanced. At the same time, the policy of production limits in Tangshan area in July was just introduced, and the duration greatly exceeded the previous market expectations, which will boost bulls’ confidence, and futures price were estimated to remain narrow strong shock trend.

 

Agency monitoring data shows that by the end of last week, the inventory of rebar of 35 major market in China was 3.792 million tons, reduced by 22000 tons, a decrease of 0.58% ; the inventory of wire rods was 1.035 million tons, reduced by 48000 tons, a decrease of 4.43%.

 

The leading mills in east china issued their new price of mid-July on July. Shagang increased its ex-works price of rebar and coiled rebar by RMB100/ton, and wire rods by RMB60/ton; Yonggang increased its ex-works price of rebar and coiled rebar by RMB100/ton, and wire rods by RMB50/ton.  According to the insides, the rate of increase was nearly in line with market expectations. With the rising cost of goods arrived later, market price will be supported and strong.

 

The recent domestic market performance is relatively weak, and most dealers also very confused about how future market will develop. But the duration of production limits in Tangshan area in July greatly exceeded the previous market expectations, which shows the government's determination on strengthening environmental protection management. It may affect the recent market supply, and also may elevate the market mentality and support price trend. It’s expected that the recent domestic steel price will remain narrow strong shock trend.