China Metals Weekly (CMW), September 21^st newsletter reported that long products prices fell across the board on a week over week basis from 0.5% to 2.1%. However, on a month over month (m/m), basis long products increased for all long product lines. Angles advanced 5.3% m/m to $605 per ton, channels moved-up 4.8% m/m to $595. Beams rose 3.4% m/m to $580. Wire rod priced increased 2.9% m/m to $572 and rebar was up $17 to $550 per ton, a 3.2% m/m increase. Hot rolled coil (HRC) prices on the other hand slid, 6.7% m/m to $397 per ton.

Over a year on year, (y/y) period, long product prices were up by an average 76% or $250 per ton. Channels advance the most, up 85% y/y, (+$274 per ton) followed closely by angles which were higher by 83%, (+$274 per ton). Beams rose $247 per ton, a 74% increase y/y. Rebar moved-up by 65% y/y, (+$216 per ton) and wire rod rose 71%, (+$237 per ton). Hot rolled coil increased by a comparatively smaller $24 per ton or +6.5%.

Figure 1 shows the price history per net ton for longs and HRC from 2014 to present. Long product pricing is surging higher while HRC is trending lower. Currency exchange is not a major influence on the upward price movement. The Yuan has moved very little against the US$. The exchange rate was 6.669 Yuan, (or RMB) per US$ a year ago. The rate was 6.584 Yuan per US$ today, a 1.3% difference.

The increase in prices of long products in China is being driven by stronger economic activity. Fixed asset investment increased by 7.8% y/y in China. Infrastructure investment excluding power was up 12.2% y/y. Real estate investment advanced by 3.1% as buildings under construction total 77.69 billion square feet. Automobile sales were up 4.8% y/y to 17.68 million units, roughly the same as U.S. consumption. Further evidence of a stronger economy is electricity consumption which increased by 6.8% y/y to 4.15 trillion, (T) kWh. Of this amount, 80.3 billion kWh, (B) was in primary industry, 2.92T kWh in secondary industry and 573.5B kWh in urban and rural residential living. Figure 2 shows the price history per net ton for structural steel from 2010 to present. Current pricing is back to the 2012 level, when the Chinese economy was growing at 8% GDP. For the first two quarters of 2017, China’s GDP grew at an annual rate of 6.9%, exceeding parliaments 6.5% target rate. If the trend continues, 2017 would be the first year China’s growth rate accelerated on the preceding year since 2010.

Referencing China customs, the output of rebar and wire rod was up by 6.3% in August and down by 4.0% y/y to 18.594Mt and 11.708Mt respectively. Total output of rebar and wire rods were about 137.5Mt and 90.3Mt respectively during the past eight months of this year, up by 3.1% and down by 3.9% y/y. Volume updates were not provided for structural products in this weeks report.

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.