CISA de­codes steel rise, raps spec­u­la­tors

China Daily (Hong Kong) - - BUSINESS - By MENG FANBIN meng­fan­bin@ chi­nadaily.com.cn

The China Iron and Steel As­so­ci­a­tion or CISA has sought to calm the mar­ket that has been in tur­moil of late due to ru­n­away com­mod­ity prices.

In a state­ment on Thurs­day, CISA said steel prod­ucts’ price surge is not due to strong de­mand or in­ad­e­quate sup­ply but spec­u­la­tive trad­ing by some un­scrupu­lous mar­ket play­ers.

It also said gov­ern­ment poli­cies on steel over­ca­pac­ity re­duc­tion, elim­i­na­tion of in­fe­rior steel and en­vi­ron­men­tal pro­tec­tion have been over-in­ter­preted and even mis­un­der­stood by the mar­ket.

CISA sought to scotch ru­mors that sup­ply of steel prod­ucts has re­duced sharply caus­ing the prices to soar af­ter the first half of the year. It dis­missed talk that en­vi­ron­men­tal pro­tec­tion mea­sures may have led to a sup­ply crunch.

The mar­ket has been in a tizzy since the last few weeks over the surge in prices of some steel prod­ucts.

For in­stance, de­formed steel bars traded at 4,050 yuan per met­ric ton on Fri­day, up 31 per­cent from 3,090 yuan at the be­gin­ning of this year.

Sim­i­larly, hot-rolled plates traded at 4,100 yuan per ton on Fri­day, up al­most 10 per­cent from 3,730 yuan at the be­gin­ning of this year.

Even fu­tures prices of the black metal have been trend­ing up.

For in­stance, the Jan 15, 2018 con­tract for de­formed steel bars closed at 3,850 yuan per ton on the Shang­hai Fu­tures Ex­change on Fri­day. Although down 2.95 per­cent from Thurs­day’s 4,209 yuan per ton, the trend has been up­ward.

On June 4, it traded at 2,935 yuan per ton, which means the price has since risen 31 per­cent.

That is not all. Shares in most listed steel com­pa­nies have soared of late as well. For in­stance, Baos­teel Co Ltd ended at 7.71 yuan on Fri­day on the Shang­hai Stock Ex­change, up 26.39 per­cent from 6.1 yuan on June 1.

To take stock of the alarm­ing sit­u­a­tion, CISA held a closed-door meet­ing of in­dus­try play­ers on Wed­nes­day.

Rep­re­sen­ta­tives of ma­jor steel com­pa­nies, fu­tures ex­changes, fu­tures traders, e-com­merce plat­forms ded­i­cated to steel prod­ucts, in­dus­try in­for­ma­tion providers and con­sul­tants at­tended the meet­ing. yuan

They agreed that spec­u­la­tive traders spread ru­mors about sus­pen­sion of pro­duc­tion and that steel com­pa­nies were fac­ing trou­ble due to strict en­vi­ron­men­tal reg­u­la­tions.

They said spec­u­la­tors’ wit­ting or un­wit­ting ac­tions are lead­ing to price swings, which could un­der­mine the on­go­ing ef­forts to cut ex­cess ca­pac­ity in the steel in­dus­try.

Spec­u­la­tors ap­pear to lack a thor­ough un­der­stand­ing of the en­vi­ron­men­tal poli­cies, in­dus­try peo­ple said at Wed­nes­day’s meet­ing, adding that the air pol­lu­tion con­trol plan is a mea­sure to sus­pend and limit pro­duc­tion of steel com­pa­nies lo­cated in a spe­cific re­gion ex­pe­ri­enc­ing haze, and not across the coun­try.

The out­put of the com­pa­nies af­fected does not ac­count for even 50 per­cent of the over­all steel re­duc­tion, they said.

In ad­di­tion, spec­u­la­tors do not ap­pear to be aware of the en­vi­ron­men­tal sta­tus of Chi- na’s steel com­pa­nies. Nor do they know that lo­cal gov­ern­ments im­ple­ment en­vi­ron­men­tal poli­cies in a sci­en­tific man­ner, in­dus­try rep­re­sen­ta­tives said at the meet­ing.

“Ac­tu­ally, most steel en­ter­prises in China, es­pe­cially the big boys of the in­dus­try, are al­ready com­pli­ant with the world’s top stan­dards for en­vi­ron­men­tal pro­tec­tion,” said Huang Dao, di­rec­tor of the tech­nol­ogy en­vi­ron­men­tal pro­tec­tion group of CISA. “Some com­pa­nies such as Hes­teel Group and China Baowu Steel Group are, in fact, world-class in this re­gard.”

En­vi­ron­men­tal poli­cies have only a lim­ited ef­fect on the sup­ply of steel prod­ucts be­cause lo­cal gov­ern­ments do not im­pose pro­duc­tion halts or any other re­stric­tions on en­vi­ron­men­tally friendly en­ter­prises, CISA said in its state­ment.

CISA’s proac­tive ap­proach to in­for­ma­tion shar­ing would help the mar­ket to be more ra­tio­nal than be­fore, said Wang Guo­qing, re­search di­rec­tor at the Lange Steel In­for­ma­tion Re­search Cen­ter in Bei­jing. “Steel prod­uct prices rose too fast re­cently with steel bil­lets gain­ing an av­er­age 100 yuan per day, in­creas­ing the risk of a crash later.”

clos­ing share price of Baos­teel on Fri­day

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