Mysteel survey on steel product transfer from North to South

 Mysteel conducted a market survey on China’s North-to-South transfer of steel products which usually started before winter comes in North and the results show as below.

1. Steel mills’ raw material stock remains low

Steel mills’ raw material stock does not change much, and since the production of steel products slows down from Oct, mills are also intending to decelerate raw material replenishment. In the mean time, since mills are generally facing with heavy pressures from capital tension, they are not likely to expand purchasing of raw materials.

2. Mills in Northeast keeps low production

Steel mills in Northeast which have been shrouded under winter cold increased maintenances and thus productions are kept at low level. The shipment of steel products from Northeast to southern areas is also at limited size at present. However, steelmakers in North China which just take a relieve from APEC control are reporting to resume production as soon as the meeting is closed to feed orders, and in short run, steel supply in these regions would burst robustly.

3. North-to-South shipment seen to rise m-o-m, but down y-o-y

According to a rough estimation, the shipment of steel products from Northeast to South is recorded at 695,000 tonnes in Nov, increasing by 110% or 360,000 tonnes from Oct, among which the shipment of rebar is seen to rise by 230,000 tonnes, and that of wire rod up by 130,000 tonnes. But comparing to the same period last year, the total shipment volume from Northeast to South is cut down by 113,000 tonnes. Specifically, wire rod supplied by Beitai Steel, Rizhao Steel and Xinda Steel totally was contracted by 105,000 tonnes, and rebar from Linggang, Xigang and Jianlong Steel was axed by 110,000 tonnes. Steel products supplied by New Fugang, Siping and Yinggang see slight increase, and those from Jingang, Yuanxin Steel and Xicheng Steel are kept at the same level with last year.

4. Traders are loath to start winter hoarding

Most trading companies are not reporting intentions to start winter hoarding seeing the sideway beating market status quo, except for some individual steel trust companies. Currently the arrived resources to East and South areas are seen increasing apparently, which aroused some trading companies to take orders naturally, since the current social inventory stays thin and the circulation speed could be assured to some extent. There are also individual traders who have to hoard based on contracts, but they will control the hoarding volume.

5. North-to-Very South shipment this year

North-to-South steel shipment this year shows different regional distribution from years before. Resources arrived to East China regions are not as many as normal years, but the shipment to the very South areas are expanding fast. For instance, the goods arrived at Huangpu Port, an important port at mouth of Pearl River in Guangzhou province, reached 182,000 tonnes, 274,000 tonnes and 421,000 tonnes respectively in the early- Mid- and late-Oct, increasing by -80,000 tonnes, 25,000 tonnes and 87,000 tonnes y-o-y. In the first ten-day period of Nov, the volume of steel products planned to arrive at the port bounced off 140,000 tonnes to 399,000 tonnes, jumping by as much as 54.05% y-o-y, far outreaching last year’s 259,000 tonnes, probably resulted from the huge price gap.

It is concluded that steel mills in Northeast area are expediting to ship products to South owning to the price gap between North and South and the flagging demand in Northeast. But mills in North China would not increase products injection to South obviously in short term as local demand cannot be met at present due to large scaled production suspension. After the production was resumed to normal levels, the products there would also speed up to arrive in South.

Winter hoarding operation is now gradually fading out of traders’ consideration, as the bet might be suicide-risky. Steel makers will keep on production as long as there are proper profit margins, but the volume of shipments to South would be confined by downstream demand largely.

Edited by www.mysteel.net