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April 13, 2017

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Steel prices see largest drop since June

CHINA’S steel prices yesterday fell to the lowest since December after plunging 10.7 percent over the past 30 trading days — the largest decline since June — amid bearish investor sentiment on demand outlook, expanded domestic production and shrinking exports.

The average domestic steel price was 3,670 yuan (US$533) per ton yesterday, down from 4,110 yuan per ton on February 28 when it peaked, according to Lange Steel Information Center, a domestic steel industry consultancy.

Building and construction steel led the loss as “China tightened credit in the property sector, which dampened sentiment among investors for its raw materials,” said Wang Guoqing, research director at Lange.

The most traded hot-rolled coil for October delivery dropped 4.21 percent yesterday to 2,913 yuan per ton, the largest daily loss since March 24, while its spot price in Shanghai fell to 3,110 yuan per ton yesterday from 3,900 yuan per ton on February 28. Hot-rolled coils are used to lay foundation for houses and are also applied in the automobile and heavy machinery industry.

Jiang Chao, chief analyst at Haitong Securities, predicted the price plunge “won’t stop in the short term” in line with the government’s efforts to curb excessive credit, which hurt investors’ expectations of demand for industrial raw materials.

The steel supply, however, stayed high as “around 90 percent of domestic producers continued to be in operation, equaling the record high last year,” said Ma Li, chief analyst at Lange.

Despite China’s efforts to close inefficient steel plants to cut a glut of capacity, steel firms have been increasing output following surging prices last year, according to the China Iron and Steel Industry Association.

The higher prices saw China producing 10.2 million more tons of steel from December to February compared with a year earlier, while the inventory for building steel jumped 70 percent from the same period of last year to 14.1 million tons in February, Ma said.

Shrinking exports “worsened the case” as China sold 2.1 million tons of steel abroad in the December-February period, 7.54 million tons fewer from a year earlier, “amid surging domestic prices last year and several anti-dumping policies instituted by the United States and Europe,” Ma said, quoting the National Bureau of Statistics.


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