China Metals Weekly (CMW), July 19^th newsletter reported that prices were up across all product lines on a week on week (w/w), basis. Angles advanced 4.1% to $529 per ton, channels increased by 2.9% to $510. Beams rose 2.6% to $510. Wire rod priced increased 1.8% to $505 and rebar jumped by 6.4% w/w to $500 per ton. Hot rolled coil (HRC) was up 0.7% w/w to $421 per ton. CMW reports that stronger demand for infrastructure as well as general construction is helping to advance long product pricing.

On a month on month (m/m), comparison, wire rod surged 11.3% as rebar rose 6.4%. Angles soared 9.8% as Channels jumped 7.7% and Beams advance by 8.1%. HRC rose a comparatively small 0.7% m/m.

On a year on year (y/y), period long product prices were sharply higher ranging from +50.8% for Angles and Channels to +68.4% for rebar. The y/y price increase for HRC was a significantly smaller +17.6%. Currency exchange rates y/y had little impact on pricing. The Yuan /US$ exchange rate was 6.696 on July 20^th 2016 vs. 6.754 today, a 0.87% difference.

Figure 1 shows the price history per net ton for longs and HRC from 2014 to present. Longs are trending higher while HRC has plateaued in a narrow range.

According to the data from China Customs, Chinese trade surplus was $42.765 billion (B), in June. Total trade value was $350.417B in June, up by 3.0% m/m and 13.8% y/y. In the first half of 2017, the trade surplus was $185.065B, with import and export value of $862.208B and $1.047 trillion respectively. Chinese steel exports in June totaled 6.81 Mt, down 170,000 Mt m/m and off 37.8% y/y. Year to date exports totaled 40.99 Mt down 28.0% y/y. Iron ore imports were 94.70Mt in June, up 3.18Mt m/m and up by 16.0% y/y, Year to date iron ore imports totaled 539.26 Mt, up by 9.3% y/y.

China’s GDP rose 6.9% y/y in the second quarter, in line expectations. The economy is expected to achieve its 2017 target of 6.5% to 7% GDP growth. Retail sales are outperforming GDP growth thanks to strong income growth. Manufacturing sentiment in China improved in June, with the official PMI rising to 51.7, up from 51.2 in May. Manufacturers report stronger export and domestic orders indicating further healthy spending ahead. On the policy front, president Xi Jinping announced that a cabinet-level committee will be formed to conduct financial oversight. The government plans reduce leverage in state-owned enterprises.

Chinese industrial enterprises grew by 7.6% in June, 2017, 1.1% higher than that in May. The output of pig iron, crude steel and steel products rose by 2.2%, 5.7% and 0.7% to 61.68Mt, 73.23Mt and 97.57Mt in June. On a YTD basis the output of pig iron, crude steel and steel products were 362.56Mt, 419.75Mt and 551.55Mt respectively, up by 3.4%, 4.6% and 1.1% y/y.

According to CMW, billet prices were reported to have increased by approximately US$15/t in most regions, ranging between $456 and $464 per tonne. Scrap prices were stable, trading in range of between $174 to $226 per tonne dependent on grade and location,

At Gerdau we keep a keen-eye on Chinese steel production and pricing. China produces close 50% of the world’s steel and as a result has a massive influence on global steel trade patterns. Imported steel volume and pricing has an influence on domestic steel so we routinely monitor it.