China’s Steel Price for July Unexpectedly Drops

The steel market in China turns on the red light again. On June 12th, Chinese steel plants, Baosteel and WISCO, both announced their domestic selling prices for July. Except for the prices of wire and electromagnetic steel sheet keeping flat, other prices of cold rolled, hot rolled, and hot dip galvanized steel all demonstrate an unexpected drop, which not only surprises the domestic Chinese steel companies, but also gives more or less pressure to the operation of other Asian steel plants. 

The domestic selling prices of Baosteel in the first 5 months of 2015 continued to drop until this June and its latest domestic selling prices of hot rolled, cold rolled, hot-dip galvanized, and acid pickled products (except for wire, electromagnetic steel sheet, and steel sheet keeping flat prices) for July announced on June 12t all dropped by RMB80-100 per ton. Another steel plant, WISCO, also reported the same dropping trend.

Analyzing the price drop of Baosteel and WISCO, steel experts originally considered that the current steel prices had touched the lowest point and might soon bounce back, as the global iron ore price went up to USD65.25 per ton, the price of global steel scrap also showed recovery, and the average prices of hot rolled products in Shanghai or Guangzhou were at low levels. They didn’t even think about that the drop in steel prices would happen again, which then surprised them a lot. 

Steel analysts said that the drop in steel prices in China was mainly due to its “still high” crude steel capacity with over 2.2 million tons production in a single day. In contrast, the stimulus for its economic growth was not enough and the market demand continued to be weak, so orders placed to steel plants were worse than expected and steel plants involved were forced to compete in a price-cutting war. Recently, countries like the U.S. have imposed antidumping measures against certain imports from China, cutting down China’s exports and increasing the sales of steel in domestic China, which may be one of the important reasons that lead to drop in steel prices. 

If such a development could cause impact on the domestic selling price for Sep., which Taiwan’s China Steel Corp. (CSC) is going to announce in the 2nd half of July, will be the concern of many industry players. CSC said that the selling prices for July announced by Baosteel and WISCO did actually surprise the industry. However, there are still one and a half months before CSC announces its domestic selling price in Sep. As a result, it is now too early to say that the price drop this time will cause certain levels of impact on the following prices.