After the recession, which lasted four months, domestic steel prices in China in late June – early July went up, adding in the last two weeks, on average, $5-10 for T. However, many market participants are optimistic and expect the new enhancements, and several steel companies announced an increase in ex-works quotations for long and flat products.
According to experts, the emergence of a new trend occurred for good reasons. First and foremost, in the Chinese steel market has seen an expansion of demand for steel products. Stocks of distribution companies, socresonline for nearly two months, again gradually grow. It is regarded as a sign that traders are stocking up on steel products before the autumn growth of business activity. In this case, they obviously do not expect the continuing recession and not fear that their reserves will lose value.
A role, of course, was the increase in the cost of raw materials. Iron ore in July, consistently exceeds the mark of $120 per ton CFR, has increased slightly in recent years, and the price of scrap metal in China and the whole Asian market. Low profitability of the steel industry is forcing steelmakers to stop the policy of concessions, and changes in raw material costs now reflected in the cost of steel products.
Another factor was the limited supply. Chinese steel exports in June amounted to 5.29 million tonnes less than the may of 5.41 million tons, but still represents a significant figure. In addition, in late June, the market finally felt the reduced rolled products output by some companies.
Changed for the better in recent times and expectations. The state Council of China in late June, has proposed an ambitious programme for the fight against slums. Over the next five years it is planned to carry a variety of "shanghaicity" on the outskirts of large cities and industrial zones and to build in their place a normal housing for about 10 million families. The cost of implementing this program are estimated at 300 billion yuan ($49 billion) per year. It is obvious that its implementation will contribute to a considerable expansion of demand for structural steel.
However, at the same time, many experts warn that the current increase of quotations on the rental may be short-lived and again replaced by the recession. The problem lies in the fact that the rise in prices of steel products is based solely on assumptions and expectations that can not be justified. The housing program will likely not begin before early 2014, and the current situation in the national economy frankly is not happy. The demand for Chinese goods abroad is limited. The production of cars, household appliances, industrial equipment, demand in the domestic market, in recent years is stagnating. A number of banks have problems with funding, due to reduced lending to the real sector. All of these factors will restrain demand for steel products in the coming months.
Besides, Chinese steel companies were pleased with the increase in demand, again increasing the output. According to the national steel Association CISA, in the third week of June, steel production in the country exceeded 2.18 million tonnes per day or more than 795 million tons in annual terms. At the end of may – beginning of June, this figure was less than 785 million tonnes per year. Therefore, if in the next month or two in China will not be increasing the real demand for steel products, the current increase in prices may again turn South.
 
Victor Tarnavsky
Rusmet.ru