Raw material prices in China rise amid falling steel prices

Steel raw material prices, including iron ore, coke and scrap metal, are showing strong growth, recently soaring to their multi-year highs in China, ignoring the fall in domestic steel prices, and this could continue for the foreseeable future. according to sources in the Chinese market.

Market participants are calm about the price difference

A scrap procurement officer at a leading steel mill in China expressed little concern about the discrepancy in raw material and finished steel prices.

“Even if raw material prices rise, the price difference, for example between scrap and rebar, is still around RMB 1,200 per tonne, which is a pretty decent gap compared to the RMB 600-700 per tonne difference in 2015. tough days for Chinese steel mills, so the overall market situation is normal, there is nothing to worry about, ”he said.

“I don’t see a solution for Chinese steel mills yet,” a spokesman for a steel mill in Hebei province in northern China admitted. “Steel makers will have to put up with reduced steel margins due to higher raw material costs, but they will not cut production. if they do not incur serious losses, ”he added.

In addition, the rise in commodity prices was more due to the support of their own fundamentals, and to some extent this contributed to the rise in steel prices, as fundamentals of long positions such as rebar were not as robust amid remaining strong performance while declining demand in the cold winter. In addition, in the first quarter of each year, there is a downward trend in iron ore supplies from Brazil and Australia due to unfavorable weather conditions.

A spokesman for an electric arc plant in Zhejiang province in eastern China confirmed that “although steel prices have started to decline (since early December), we still have rebar margins at 150 yuan per ton on average, so production is declining. not on the agenda. "

Thus, he expected that, despite the lower steel prices, the prices of steel raw materials would increase further.

The main representative of the steel plant shared the forecast. “When prices rise or fall, everyone in the steel value chain, including suppliers of iron ore, scrap and coke, and steel mills, are making money, which is a healthy environment in my opinion, much better than in 2018 when Chinese steel mills were the only big winners, and that could mean that markets will go their own way for a while, ”he added.

According to him, the margin of st