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Summary:

Monthly Report on China Construction Steel Market for May, 2010

Under the impact of profit-taking, hard austerity policies and volatile global financial market, China construction steel market headed south in May while wire rod and rebar price even fell down below CNY4000 per tonne in some markets.

As the nation launches stricter controls on property market and the government strengthens regulation on risks in local-government financing, China construction steel market will be in face of weakening demand in the short term.

At the same time, countries all over the world are cautious about making stimulus exit plan and China seems to slow down the pace of macrocontrol as the foundation of global economic recovery is not solid yet and impacts from European sovereign debt crisis remain uncertain. It will be favorable to help stabilize market sentiments. Moreover, the national further intensifies energy saving and emission reduction while raise power surcharges for high energy consumption industries. 30 million tonnes of iron-making capacity and 8.25 million tonnes of steel-making capacity will be phased out before the third quarter. The moves will restrain the growth of construction steel production to some extent while help bolster production cost up. It is expected that China construction steel market will fluctuate amid inventory digestion while wire rod and rebar price might edge slightly higher in some key cities.

I Review on May market

l.1 Daily output of construction steel hit a fresh record high and market supply grew rapidly

I.1.1 Daily output of construction steel hit a fresh record high

I.1.2 Rebar exports registered a monthly decrease while wire rod exports kept rising

I.1.3 Market supply grew rapidly

I.2 Fixed assets and real estate investment kept rapid growth but new projects posted a year decrease

I.3 Construction steel inventory slightly went up

I.4 The growth of Central Bank’s money supply slowed and new loans posted a monthly increase

II Analysis on May Market

II.1 China construction steel market will be under pressure of weakening demand in a short term as the nation carries out stricter regulation on property market and risks in local government financing

II.2 The nation intensifies energy saving and emission reduction work, which will curb the growth of construction steel production and bolster input cost up

II.3 more steel mills start up overhaul as construction steel price down below cost line, which will be favorable to improve the relationship between supply and demand

II.4 The pace of macro control slows down while Central Bank turns to net capital injection and money supply will remain abundant

II. 5 Raw material prices retreat but remain high, which will prop construction steel price up

II.6 Steel mills’ ex-works prices are still lower than market price despite of massive price cut

Table 1 Spot price of China wire rod/ rebar in May

Table 2 Ex-works prices of China ’s leading steel mills in May

Graph 1 6.5mm Q235 wire rod price trend in May 2010

Graph 2 20mm HRB335 rebar price trend in May 2010

Graph 3 Monthly output and growth of construction steel in 2009-2010

Graph 4 Accumulative construction steel output and growth in 2009-2010

Graph 5 Daily output of construction steel in 2009-2010

Graph 6 China construction steel import in 2009-2010

Graph 7 China construction steel export in 2009-2010

Graph 8 China semis import and export in 2009-2010

Graph 9 Monthly supply of construction steel in 2009-2010

Graph 10 Accumulative supply of construction steel in 2009-2010

Graph 11 China’s urban FAI in 2009-2010

Graph 12 China’s real estate investment in 2009-2010

Graph 13 China construction steel inventory in 2009-2010

Graph 14 China money supply growth in 2009-2010

Monthly Report on China Stainless Steel Market for May, 2010

China stainless steel market fluctuated downward in May 2010. Prices of 304 CR/HR stainless steel dropped more than 10 percent compared with that of late April, and that of 201 and 430 stainless steel went down about 8 percent month on month. Nickel price plunge made grate contribution to this round of stainless steel price fall; however, high inventory level as well as bleak transaction to some degree accelerated the market.

Sticker price of 304 stainless steel from Taiyuan Steel was cut by CNY 1,000 per tonne, after that, price of 304 CR stainless coil stood at CNY 24,500 per tonne. Ex-works price of steel mills appeared much higher than the real dealing one in the market, steel makers showed they will offer about CNY 2,500 per tonne subsidy for their distributors. Due to complex international economic environment, fundamental of nickel market seemed pessimistic, it is predicted that international nickel price will keep fluctuating in June.

According to analysis on current market, it is forecasted that 300 series stainless steel will continue vibrating in June, that of 430 is likely to fluctuate downward, and that of 201 will swing by that of 300 series, however, the degree is limited.

I Stainless steel price plunged at leading Chinese markets

II Analysis on China Stainless Steel Market for June 2010

II.1 Supply/demand

a) order-takings of China’s leading manufacturers are unsatisfactory

b) Both import and export of stainless plate/strip jumped up year on year but a slight drop month on month

c) Stainless steel oversupply to maintain

II. 2 Stainless metallics market

a) Both the price and inventory of LME nickel plunged constantly

b) High carbon ferrochrome price waned mildly

c) Leading stainless steel decreased ex-works price entirely in May 2010

d) Stainless steel inventory of leading domestic markets retained at high level

Table 1 Stainless Steel Plate/strip Price Alteration in China Major Markets in May, 2010

Table 2 SS Plate/strip (width≥ 600mm ) Import and Export in April, 2010

Graph 1 SH_CSPI-SS price index during Jan.1, 2008-May 31, 2010

Graph 2 SS Plate/strip Price Alteration in Wuxi Market since 2008

Graph 3 China CR SS sheet import & export in 2008-2010

Graph 4 China’s medium and heavy HR SS strip import & export in 2008-2010

Graph 5 Import & export of China’s SS plate (strip) in 2008-2010

Graph 6 LME three month nickel futures price and inventory since 2008

Graph 7 Stainless steel inventories at Wuxi in 2008-2010

Monthly Report on China Iron Ore Market for May 2010

China iron ore price went down by CNY 50-200 per tonne entirely in May 2010. Dampened by overall steel price plunge, small-and-medium steel mills were on the edge of loss and cut down iron concentrates purchasing to some degree, as for leading steel mills, due to sufficient inventory as well as the consideration of reducing procurement cost, they whittled iron concentrates purchasing price substantially.

As a result of shrinking purchasing from China purchasers, iron ore import price slumped sharply this month, as of end May, the actual dealing price of Fe content of 63.5 percent Indian fines dipped a total of US$ 37 to US$ 147-150 per tonne (CIF).

Domestic dressing plants appeared hesitated in delivering after significant iron ore price drop. As long as no risk of seeing the expansion of steel production cut, the demand for iron concentrate in the future will maintain at high level.

Due to reducing imports from India as well as high expectation on iron ore price growth in Q3, it’s hard to see iron ore price to fall, it is predicted that iron ore price in June will continue to rise after a slight fluctuation.

I China iron ore price kept falling in May 2010

II Analysis on China iron ore market in June 2010

II.1 Available iron ore supplies are likely to rise in June 2010

II.2 Price of imported iron ore dipped entirely

II. 3 Ocean freight to fluctuate upwardly in June

II.4 Iron ore inventory at ports climbed up to some extent

II.5 China steel price plunged in May 2010

II.6 all domestic steel mills started to consume expensive raw material

II.7 Australia put forth to levy resource tax on iron ore

II.8 More and more steel mills arrange facility maintenance

Table 1 China iron ore price in Jun. 2009-May. 2010

Table 2 Steel Price Changes at Domestic Market

Graph 1 China iron ore price in 2009-May 2010

Graph 2 China output VS import in 2009-Apr.2010

Graph 3 Price contrast between domestic and import in 2009-May 2010

Graph 4 International ocean freight in 2009-May 2010

Graph 5 China iron ore import & inventory in 2009-May 2010

Monthly Report on China Scrap Market for May 2010

Falling steel price clouded China's scrap market in May, with the price drop of CNY 100-200 per tonne. Part medium-and-small-sized steelmakers suspended the scrap bookings, and market transaction turned insipid. International scrap price also suffered price drop, but the whole level remained high. Growth rate of China's scrap imports slowed down.

China's scrap spot resources will keep tight in June as a result of busy farming season and sellers' holding resources on hand. On the rally of steel price, part steel mills will replenish scrap stocks in June, thus, scrap price in China will inch upward.

I Review on China scrap market in May 2010

I.1 China-produced scrap market price collapsed

I.2 Steel price collapse clouded scrap transaction