Domestic steel market participants have not received the "good start' after the Three-Day New Year Holiday, which had been waited for during a long time. Recently, near the lunar New Year Holiday, Chinese spot steel markets run with depressed conditions, e.g. poor transactions due to the very low demand, while more and more traders are preparing for the holiday; what's more, restocking almost has shown a failure, since the lack of optimistic anticipation for the market after lunar New Year.
Look at the physical prices of products in the market. During the first two weeks of 2012, internal steel market prices have been in a weak and downing trend. Until Jan 13, representative type of qualified GradeⅡrebar is offered at about RMB4160/MT, downing by RMB20/MT from the week before; while representative type of qualified Grade Ⅲ rebar is at RMB4360/MT, also with a RMB20/MT drop.
Poor prices usually bring low profit to participants. During the whole 2011, earnings of domestic main makers have dived obviously, after which, a meager profit time may come to us. "Under the current conditions, the meager profit would live in Chinese steel makers for two or three years,' Chairman of Baosteel said.
Why the hardship has started and would last in the future years? According to www.cnchemicals.com, there are some reasons as below:
First of all, the high costs make the burden heavier. These costs include costing from raw materials and that of commodity logistics, which increase the total burden of product sales by a large extent.
Second, the shrunk demand acts as another terrible disease for the market. During 2011, downstream industries, such as autos, appliances, and constructions etc. all ran in doldrums, during the strict monetary policy regulation and control, which is against the inflations at home and abroad. In 2012, it is said that domestic monetary policies may loose in some way, and constructions of the supportability housing may bring some steel demand; however, after the blow of 2011, which was also about the demand expectation of domestic supportability housing constructions, steel makers and traders have become more cautious, especially in the parts of steel procurement.