Flats in China are forced to cut production as supply exceeds demand, especially for hot dip galvanizing (HDG), while long products have a higher profit margin and demand is growing.
Hot Rolled Coil (HRC) prices from Shanghai traders have been below rebar prices in Shanghai over the past nine months due to declining car sales and exports. Rebar prices were boosted by stronger growth in demand for structural steel and the closure of illegal manufacturing in 2017, leading to a decline in supply.
China's HRC production is projected to increase by almost 30 million tonnes to 300 million tonnes per year in 2018-1919.
HRC prices in Shanghai rose 9.6 percent YTD to RMB 4,000 per ton from warehouse, while Shanghai rebar prices rose 8.3 percent to RMB 4,050 per ton from warehouse over the same period ... The factories report a gross margin of about RMB 400 per tonne of rebar, but only about RMB 200-300 per tonne HRC.
Oversupply has reduced profitability and cold rolled coils (CRC) for sellers. Restrictions on new blast furnaces have led mills to invest in products for downstream processing, leading to an oversupply for CRC.
The weekly price of Shanghai CRC fell 14 yuan to 4238 yuan per tonne from warehouse on May 24.
