china-domestic-steel-feb22According to China Metals Weekly, as of February 22nd month on month (m/m) long product prices are up across the board ranging from 10.6% for 6.5mm wire rod to 13.3% for 20mm rebar. For reference 3mm hot rolled coil prices advanced at a far slower rate, up 3.4% m/m.

Figure 1 illustrates the pricing history of Chinese long pricing together with hot rolled coil pricing for comparison. Prices bottomed out in December 2015 (rebar US$230), then staged a sharp advance topping out in April 2016, (rebar US$391). Prices then collapsed again bottoming out on June 1st 2016, (rebar US$270). Since then the rise in the slope of the price curve has been steep as advancing raw material costs (coking coal and metallurgical coal), caused producers to aggressively raise prices. February 22nd prices were the highest (rebar US$477, wire-rod $472, angle $497, channel $490 beam $501, HRC $529), since April 2014. Looked at in percentage terms year on year, prices for long products plus HRC surged by an average of 74%.

The Chinese economy as reflected by the macroeconomic numbers is slowly gaining strength. GDP advanced 0.1% quarter on quarter to end 2016 at 6.8% annualized growth as the industrial production index advanced by 6.0% in December. China had a US$51.3 billion trade balance with the US in January 2017, up from US$40.8 in December.

At Gerdau we keep a keen-eye on Chinese steel production and pricing. China produces close to 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.