BEIJING, Feb. 15 (Xinhua) -- Hot-rolled coil futures in China will be bearish in the medium and long term, due to the weak demands from downstream sectors such as the automobile industry, said the China Futures.
Affected by the macro economy, the auto sales in China continued to shrink in 2018, which directly led to the vehicle producers' less demands for the hot-rolled coils. As an intermediate product in sheet metal processing, hot-rolled coils eventually flow to the automotive manufacturing industry.
Data of the National Bureau of Statistics (NBS) shows that the total vehicle sales in the full year of 2018 was about 28 million units, down 2.76 percent year on year, marking the first slowdown in 28 years. About 27.9 million vehicles were produced last year in China, down 3.8 percent year on year.
The fall in vehicle production and sales will continue in the country, said analysts, adding that that poor downstream demands will weigh on the prices of the hot-rolled coil on the futures market.
Apart from the demand side, the hot-rolled coil production is also an important factor directing the prices.
Steel mills normally prefer to produce the products with more profit margins. Therefore, they usually make a decision whether to produce rebar steel or hot-rolled coils, according to the price difference of the two varieties.
According to the previous process calculation, the production cost of the hot-rolled coil is generally 200-300 yuan/ton higher than that of rebar.
However, since the implementation of the new national standard for rebar in November 2018, the demand for silicon-manganese alloys for rebar has increased, leading to the higher production costs of rebar than before, meaning that price difference between the two varieties has narrowed and the output of hot-rolled coil will not decline.
According to Mysteel, a steel information provider in China, the average daily crude steel output in the mid-November 2018 reached 2.7 million tonnes and the weekly output of hot-rolled coils maintained around 3.2 million tonnes. In 2019, the overall supply of steel products will likely remain loose.
Given the supply-demand situation, the prices of hot-rolled coils will be under pressure in the medium and long run, said analysts.
On Thursday, the Shanghai benchmark hot-rolled coil contract for May delivery closed 0.89 percent lower at 3,567 yuan/tonne. (Edited by Hu Pingchao, hupingchao@xinhua.org)
A single purchase
