China Metals Weekly (CMW), July 5th newsletter reported that prices were up across all product lines on a week on week (w/w), basis. Angles advanced 2.8% to $504 per ton, channels and beams each increased by 2.0% to $492 and $494 respectively. Wire rod priced jumped 4.9% to $488 and rebar rose by 3.8% w/w to $483. Hot rolled coil (HRC) was up 0.3% w/w to $417 per ton. According to CMW, long prices are moving higher on stronger demand for infrastructure and general construction. There was a temporary supply shortage reported for sections in June as mills shifted production to rebar and others were shuttered for maintenance.
On a month on month, (m/m) comparison, wire rod was up by 3.7% as rebar fell 1.9%. Channels and angles each jumped 6.6% and beams advance by 6%. HRC rose a comparatively small 0.9% m/m. From the recent low point on 01/13/2016, prices were up an average of 80.2% ranging from +53.6% for HRC to +94.4% for wire rod. From the high point on 8/24/2011, prices are lower by an average of -39.8% ranging from -27.2% for angles to -39.8% for HRC. Figure 1 shows the price history per net ton for longs and HRC from 2014 to present. Longs are trending higher while HRC has plateaued in a narrow range.
According to CMW, billet prices were reported to have increased by RMB100/t (approximately US$15/t), in most regions as operating rates are rising and billet inventory is declining. Coke price rose by RMB50 to 100/t, (approximately US$ 7 to 15/t), as pig iron increased by RMB50/t in most regions. Scrap prices ranged from RMB1,280-1,800/t excluding VAT, (approximately US$192/t to $270/t), depending on the region. Scrap prices are expected to rise in the near future.
China Iron and Steel Association (CISA), reports that 107 large and medium steel enterprises realized RMB1.6 trillion (approximately US$240B), of sales revenue in the first quarter of 2017. Profit on these sales was reported to be RMB37.885B (approximately US$5.57B), in Q1, more than the profit in the whole year of 2016. This is a return on sales of 2.32%, far less than the U.S. cost of capital.
The PMI for the steel industry, it fell by 0.7 percentage point m/m to 54.1% in June. The production index rose by 0.4 percentage point to 58.6%. The NOI index for the steel industry fell by 2.1 percentage points to 58.4%. The export index rose by 1.4 percentage points to 46.2%. The stock index of steel products fell by 1.2 percentage points to 40.9%. The procurement price index of raw materials rose to 50.5% +0.9 percentage point m/m.
Referencing CMW, according to the China Federation of Logistics & Purchasing (CFLP) and the National Bureau of Statistics (NBS), the manufacturing Purchasing Managers’ Index (PMI), was 51.7% in June, up 0.5 percentage m/m. The new order index (NOI) was 53.1% in June, 0.8 percentage point higher than that in May. The production index rose by 1.0 percentage point m/m to 54.4%.
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.