The price of steel raw materials in China has risen sharply recently, with steel market prices around the country surpassing more than a decade high in May, with steel billet approaching RMB 6,000 per ton. At the same time, some companies are simply shutting down production and going on holiday because they cannot buy high-quality Australian iron ore.
Since March this year, steel and other metal materials market prices continue to rise, resulting in price increases for household appliances such as televisions, air conditioners and washing machines. And a new wave of price hikes has come recently. The 21st Century Business Herald published an article, starting this Wednesday (19), due to the upstream steel prices, Shandong Linyi Sanwei Precision Casting Co.
Entering May, China’s steel market still continues to rise, with steel prices pushing RMB 6,000 per ton. Steel prices have broken through the previous highs of 2008, hitting a new record high.
Mr. Huang, an engineer at Tangshan Iron & Steel Group, said in an interview with Radio Free Asia on Thursday that the rise in steel prices is closely related to the high demand and the rise in iron ore prices in the international market: “It is definitely a matter of high iron ore prices, and the best quality of iron ore is now from Australia, and the quality of iron ore from Brazil is not good. We used to use Brazilian iron ore, and the country next to Brazil also sells iron ore, but the quality is not good and the price is relatively quite expensive.”
The past ten days, China’s iron ore as the representative of the black system of commodities hit a number of historical extremes. May 10, iron ore futures main contract up to 1,346 yuan per ton; coking coal main contract up to 2,068 yuan per ton, up more than 6%; rebar opening straight up, once to 6,208 yuan per ton. All these prices set new historical records.
China’s high-quality iron ore is highly dependent on imports
Financial scholar Commander believes that China’s soaring steel prices are constrained by the price of imported iron ore: “This round of rising steel prices in China is a continuation of last summer’s price trend. Price increases in steel tend to be inertial, but the more important reason is actually the shortage of iron ore supply, with China relying on imports for most of its high-quality iron ore.”
Steel is an important sector of the raw materials industry, with house building, auto manufacturing, home appliances and machinery all being downstream industries of steel. The spike in steel prices has hit the downstream industry hard.
Mr. Huang said, in the case of reduced basic investment, steel prices are still rising, visible private enterprises in the dismal business: “The domestic market, including the real estate market, relatively shrinking, including some basic investment is much less. Private enterprises in this area also do not have much room for development, and private enterprises would not have had much space.”
Pictured, inside the Shougang plant in Beijing.
The head of a machinery enterprise in Suzhou told the 21st Century Business Herald that the prices of steel, copper and aluminum and other raw materials have continued to rise this year, and the enterprise is already operating at a slight profit. Mr. Xiao, the head of Shenzhen Hongchang metal foundry, learned in an exchange with his peers that some enterprises have suspended production, “some factories have given employees a holiday.
Scholars commander that China’s steel prices drive up the price of household appliances, the ultimate loss is the private sector and residential households: “Suffering or seriously affected or the majority of Chinese enterprises. So the Chinese government’s approach to trade war is tantamount to smashing its own feet, which is very contrary to the laws of the free market.”
According to reports, since January this year, the home appliance industry has begun to set off a wave of price increases. Midea, Hisense, AUX and other leading home appliances have issued price adjustment sheets, the content of the price adjustment sheets are similar: due to the upstream raw material prices, had to raise prices for its products.
Data from the Aowei cloud network shows that this year’s home appliance market prices have increased in all categories, in April, color TV offline average price growth of 31.3% year-on-year, washing machines overall industry offline average price growth of 5.5% year-on-year, air conditioning offline overall average price growth of 7.9% year-on-year.
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