Long product prices rose a fraction for all product groups for the week ending April 26th according to China Metals Weekly (CMW). However, on a month on month (m/m) long product prices were down across the board ranging from 9.9% for 16# channel to 10.5% for 20mm rebar. Merchant products and beams were down 10.1% and 10.2% respectfully. For reference 3mm hot rolled coil (HRC), prices fell by 14.6% m/m. Chinese long product prices have fallen for five consecutive weeks after rising for 8 weeks in a row.
On a year on year comparison total China steel prices were still up 7.8% overall. Channel (16#) advanced the most, +16.9%, followed closely by 50×5 angle, up 15.0% and beams up 12.5%. Rebar (20mm) and wire rod (6.5mm) were up a comparatively smaller 2.9% and 3.9% respectfully. Hot rolled coil prices were down 2.8% y/y.
Figure 1 illustrates the pricing history of Chinese long pricing together with hot rolled coil pricing for comparison. Long product prices in China on April 26th converted to US$/ ton were: Rebar $432, wire-rod $432, angle $451, channel $447, beam $444. HRC prices were quoted at $412. There have been significant pricing changes over a short period of time. Comparing this week’s prices to the first week of 2017, long product prices per ton are up from $5 on beams to $21 on rebar. HRC prices on the other hand were off $101 per ton. Comparing this week’s prices to those in the middle of March 2017, long product prices per ton are down in a narrow range from $51 to $61 per ton, while HRC was down $83.
Referencing China Metals Weekly, The output of crude steel grew by 4.6% in the first quarter, with an average daily output of 2.23 Mt, the highest in history. At this rate on an an annualized basis, China will produce about 816 Mt, slightly higher than that in 2016. Additional capacity coming on-stream is the main reason for the increased production volume. In the first quarter, China exported 20.73Mt of steel products, down by 25% y/y. In February, total exports were 5.75Mt, the lowest monthly level since February, 2014. Steel stocks remain at a very high level topping 11.69 Mt, down 360,000 tonne month on month. HRC stocks were up, while rebar, wire rod, and plate fell. Iron ore inventories set a new record high at ports, measuring 134.56 Mt, up 35.13 Mt y/y. CMW reports that some steelmakers are melting scrap, depressing demand for iron ore somewhat. First quarter gross sales were reported to be $110.58 billion, up 40.2% y/y, netting $3.1 million in profit. A 2.8% profit margin is very low return relative to other industrial enterprises and certainly much lower than the cost of capital.
At Gerdau we keep a keen-eye on Chinese steel production and pricing. China produces close 50% of the world’s steel and as a result has a massive influence on global steel trade patterns. Imported steel volume and pricing has an influence on domestic steel so we routinely monitor it.