Steel makers tap brakes on discounts
Several of China's leading steel manufacturers recently announced minor cuts to their ex-factory prices for future orders of steel products, which experts are interpreting as a sign that the domestic steel industry could be snapping out of its recent downward slide in the third quarter.
Baoshan Iron & Steel Co, a listed subsidiary of Shanghai-based Baosteel Group, China's third largest steel mill by production capacity, reduced its ex-factory prices for major products Friday by between 80 yuan and 180 yuan per ton for September bookings, marking the third consecutive month that the company has discounted its prices of hot rolled and cold rolled products.
While the domestic steel industry has been battered by thinning margins for months, industry watchers view the recent price adjustments as an augury that the country's steel market may bottom out in the coming months.
"Baosteel usually decides its monthly price list based on its order-receiving situation. Since its September price cut is much smaller compared with its price decreases for July and August, the mill must have seen improvement in its recent bookings," Liu Qiong, an analyst with SteelHome, a company that provides intelligence on the steel industry, told the Global Times Sunday.
Baosteel slashed its flat rolled products prices by between 300 yuan and 500 yuan per ton in its July and August price adjustments.
"As a weather vane of the Chinese steel market, Baosteel's latest price adjustment may serve to stabilize the steel market, by indicating that the market is not far from the bottom and showing that leading mills are not overly pessimistic about the future," Liu said.
Meanwhile, a Shanghai-based steel trader also told the Global Times that market price drops for major steel products have slowed recently after several months of steep decline, potentially pointing to an upcoming turnaround.
According to figures from SteelHome, as of Friday, market prices of rebar and wire rod in China's major cities had declined by about 50 yuan per ton since the beginning of August, much less than the average monthly decrease of over 300 yuan per ton seen in July.
Liu echoed the trader's remarks, but added that the rebound will be limited given the country's severe steel overcapacity and weak demand amid a slowing domestic economy.