CRU’s reputation is based on our ability to assimilate often conflicting information and data, apply judgement informed by technical competence (supported by powerful in-house modelling) and experience, to form a definitive view. Our China team, working with global colleagues, collaborate to understand the position, concerns and actions of local players but across all markets. This team can then reconcile a multitude of often conflicting views to reveal the underlying state of markets. Our independent pedigree means CRU can confidently express our view and be transparent about underpinning assumptions and logic.
Over the past two years our rigorous and independent approach has transformed how market participants understand what is happening in China. For example, we identified a fundamental flaw in how the world thought about Chinese crude steel production. This view is now widely accepted in the market. A similar initiative established the true picture of Chinese export volumes in flat and longs products.
As the domestic market deteriorates, the incentive to export material will increase and we expect more long products to be exported from China in the coming weeks.
Dr Paul Butterworth Research Manager, Steel Raw Materials & Steel Costs
Meanwhile we have provided the most considered and accurate view of the progress of capacity closures in the Chinese induction furnace industry – crucial to understanding how China will impact the rest of the world.
A great example of how CRU customers have benefited from our coverage of the Chinese steel industry is our analysis of the relationship between still mill costs and price movement for different products. Bringing together our knowledge of operations, costs, prices and market intelligence/contacts, we can best identify how steel mills will behave under different market conditions. This behaviour will impact on demand for raw materials, pricing, profitability, supply, and ultimately the industry’s appetite for export, which has powerful knock-on effects in all steel markets. Our customers use this inside knowledge to inform their own strategy.
Our analysis showed how rising coal prices in the second half of last year drove price rises in both export and domestic sheet prices while low scrap prices kept long product price rises lower. But what does CRU’s combination of market leading costs analysis and price reporting say about the near future?
CRU’s Dr Paul Butterworth wrote in mid- April: “Steelmaking costs are forecast to stabilise and fall in the next few weeks, and domestic rebar prices are at an unsustainable premium versus export prices. We believe that the export price provides a better indication of the true level of the market. Our interpretation of the data is that export prices will track down to the level of costs but, importantly, domestic rebar prices will fall faster until they reach a more normal differential with export prices, perhaps sometime in May.
“For sheet products the exuberant optimism towards end-2016 has been met with muted demand post-CNY and high levels of inventory have already started to pull prices down since February. Domestic prices have fallen to a more normal differential with export prices and these conditions are likely to see export volumes lift, if only marginally, and prices fall towards end-April but, as for rebar, only to the level of costs. That is, analysis of the Chinese market, set out in CRU’s China Steel Service, suggests that export prices are unlikely to fall much below full costs.”
The complete answer to your questions on China
We are proud of our coverage of in all our products. But the only place you can be guaranteed of getting the comprehensive picture of China’s impact on the world is in the China Steel Service. This service provides market leading analysis of what is really happening in China’s domestic and export markets, supported by prices assessmwnts and steelmaking margin analysis.
China Steel Service team