Chinese mills extrapolated the trend over the past couple of months in ascendency of long and flat products. The long product and flat product climbed by 5% and 2% respectively in November. Market is expectant of the same performance being replicated in December if not better.
December has maintained similar trajectory owing to the following factors
1. Continuation of power restrictions, which avoids considerable supply increase
2. Iron ore, coke, oil and scrap price gains
3. Weak USD v/s CNY that holds all commodities price at high levels and in turn supports futures and spot markets.
4. Rebar and wire rod. Demand remained firm as the winter has stayed warm so far and the constructions activity is o.
5. Electronic trading has kept the price afloat for flat products in off season.
Despite all the positivism modesty is compulsion thrust upon the steel mills who would be interested in giving stable opening in New Year. Given the inherent deficiencies the owing to:
1. Absence of core competences
2. Lack of differences in product quality and grades
3. Lack of difference in equipment, technology and management
It would be self decimating to set high price. In the transition to a new year, the steelmakers are more likely to seek cooperation from the traders and agents rather than to set prices beyond the market changes. Additionally, soaring production cost needs to be moderated lest margins get miserably squeezed in this uneven field.