Chinese steel price glitch remains isolated

The downswing in the steel market in China has brought much talk of "corrections" in the "overheated" economy, and fears of falling steel prices, according to MEPS International.

The downswing in the steel market in China has brought much talk of "corrections" in the "overheated" economy, and fears of falling steel prices.

There has been some knock-on effect in other Asian markets, but it has not yet had an impact on steel prices in the wider world which generally remain strong.

The Beijing government has been tightening the levers of the economy with the aim of achieving a "soft landing".

These measures have had a short-term impact on steel trading.

Banks are understood to have reduced the credit available to the steel market (and other sectors of the economy), causing a certain amount of panic selling.

This has mostly affected long products.

The MEPS' World Steel Price Index clearly highlights these trends.

Prices in China have shown a significant dip.

Consequently the indices for long products in Asia indicate falls of 3 to 4 points this month.

For reinforcing bar the value is 134.3 - down by 3.7 points from April.

Similar declines have been recorded for structural sections, beams and mesh-quality rod.

However, these prices remain considerably higher than they were a year ago.

The increase over the last 12 months has been nearly 55% for reinforcing bars and only slightly less for rod and sections.

Flat product prices in Asia present a different picture this month.

Steadier levels of end-user demand have kept prices more stable.

The pace of the rise in prices has slowed right down from the frenetic upsurge that characterised the first few months of this year.

The index of North American prices shows that all flat products are priced higher this month than last.

Hot rolled coil and plate have shown the biggest gains, and now stand at more than double what they were worth a year ago.

The EU price indices also show further rapid increases this month from the April values.

In the case of hot rolled coil, the index has surged ahead by just over 20 points month-on-month.

Large increases have also been registered for plate, cold reduced coil and galvanised.

Some long products are also higher, but the weakening value of scrap has caused reinforcing bar prices to retreat from last month's peak.

Many of the current fears about China are over-done.

Latest trade figures show that apparent steel consumption in April was more than 20% higher than the same month last year.

Iron ore imports - an important forward indicator of steel production - were almost 45% higher in January-April than in the first four months of 2003.

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