At the end of January on the Chinese steel market resumed growth in prices. The market value of hot rolled coils have reached the highest level in seven months. Current quotations for rebar is relatively low due to favorable weather conditions, but on the Shanghai futures exchange their level for the first time since June last year exceeded 4,100 yuan (us$659) per ton.
Chinese steel companies hope that after the New year (February 10), the growth of prices for steel products in the country not only continue but will accelerate. Baosteel Corporation, which is considered the informal leader of the industry, have published their quotes on March, announced an increase of 150-250 yuan per ton Selling prices at Baosteel have been increasing for four consecutive months, adding over the time about $70-95 for T. In particular, the March hot rolled coils offered her 4400 yuan ($707) per ton EXW.
As a rule, the cost of production Baosteel is slightly higher than the market level, however, according to analysts, here we are talking primarily about the formation of favorable expectations among market participants. Usually, Baosteel will make public their quotes on a regular month somewhere within two to three weeks in advance, but in March she delivered prematurely, putting both producers and consumers of new guidelines.
In an effort to raise the prices of steel products in February-March, Chinese steelmakers, of course, rely on a number of objective factors. Thus, the increase in the price of rent is largely attributable to the increase in raw material costs. The cost of imported iron ore in January surged to about $150 per ton CFR compared to $120-125 per ton for much of the fourth quarter. Rose recently and coking coal. According to estimates Baosteel, the cost of smelting a ton of steel over the past four months increased by approximately $30-45 per ton.
Overproduction, the former is a chronic problem Chinese steelmakers over the past year, has somewhat weakened its action. According to the national metallurgical Association CISA in December, the average volume of steel production for the first time since February 2012 has decreased to less than 1.90 million tons per day. The January numbers have increased, but not to such an extent to result in significant oversupply.
However, the greatest hopes of the Chinese metallurgists associated with the level of demand. With the onset of spring increases the consumption of steel products in reviving the construction industry. Moreover, in March to start new infrastructure projects in the framework of the state program of expansion of road and rail transport network. In recent months there has been a steady growth in the number of sectors oriented to the domestic market. First of all, the automotive industry and household appliances. In addition, consumers of steel products in China after the New year traditionally replenish inventory that will also contribute to increased demand.
Thus, it is clear that in the next month and a half, the Chinese market of steel products is on the rise. At the same time, a metallurgical company, focusing primarily on the internal needs, reduce sales abroad, which should lead to a rise in export quotations. This, obviously, will try to take advantage and manufacturers of steel products in other Asian countries, as well as Russian and Ukrainian companies, receiving a good chance to return to the far Eastern market.
However, it is unlikely that Chinese rise in February and March will be long. The excess supply and production capacity remains a major problem of national metallurgical industry. At the peak of demand, the impact will be limited, but once the excitement subsides, prices in the domestic market will go down again.
 
Victor Tarnavsky
Rusmet.ru