OREANDA-NEWS. August 03, 2012. Below are the new highlights of the domestic steel market in the first half of 2012.

Lower-than-expected demand level

Demand was weak even in the traditional strong season of May. China GDP growth hit a three-year low of 7.6 percent in the second quarter. Government spending on railway infrastructure registered a year-on-year decline of nearly 40 percent in the first half. The growth rate of investment in the real estate market also slowed.

Steel traders benefited from ex-mill price cuts

Plagued by extremely low selling figures, many steel traders have either refrained from placing new orders or simply terminated their relationship with steelmakers since early this year. 

As a result, the steel mills have found it more difficult to free working capital through channels involved by the distributors. To lure traders back, they began offering more discounts or subsidies.

Steel prices remained stagnant despite lower inventory level

In the first half of the year, domestic steel prices failed to pick up in response to an 18-week long decline in steel stocks held by distributors.

The average sales value of rebar in Shanghai fell from 4,020 yuan a ton in early this year to 3,780 yuan a ton in July. The traders have attempted to lower their inventories by placing limit order from steelmakers, leading to an inflation in the inventory at the mills.

Lower raw material costs

In the first half, the average unit price of imported iron ore decreased by 14.24 percent to USD 138.73 a ton. The prices of coke, scrap and pig iron were on the decline as well. There is room for the steelmakers to further lower their ex-works offers.

Uncertain external environment

China exported 5.22 million tons of steel in June, with an increase of 21.4 percent from a year earlier. The net steel export figure remained high at 4.35 million tons, up 33.2 percent.

There is no evidence of real improvement in the global economy. The European debt crisis is far from over. Syria political turmoil is brewing. The external climate for the steel industry is still obscure.