The Chinese government is changing the accounting procedures at both banks and the companies they loan money to, saying there can no longer be two sets of books.
Steel Market Update has learned from one of our trading sources inside of China that the latest hot rolled price, Ex-Works (FOB Mill) for ASTM A36 in 2.75 mm thickness (.1008”), is being priced at $520-$530 per metric ton ($472 per net ton). Billet prices are being quoted at the same levels, only FOB Stowed for simple SS400 or Q235 Grades. However, the Chinese mills do not want to sell billets right now as they can sell wire rod or rebar at higher margins than billets.
We asked our source what he expects to happen to prices over the balance of February, as we saw an article out of a Chinese publication called SteelHome that suggested prices could rise.
We were reminded that the Chinese New Year Holiday begins on Monday of next week and the country is essentially closed through the balance of the month.
“After Chinese New Year, prices tend to tick upwards, but to say prices will steadily improve in February is exaggerated as nothing happens in the market BEFORE Chinese New Year, which is slated for 14th Eve and 15th New Year’s Day and China is off for 2 weeks. Hence, nothing will happen till the beginning of March. Prices this week and next week will remain silent (unchanged) as no one purchases due to being cash strapped for bonuses, plus trying to unload inventory so company books look profitable into the New Year. Company accounting is crucial this time of year, and we have seen NO PRODUCTS rising over last few days nor do we anticipate increases in the coming days leading up to New Years.”
Our source continued: “As for what COULD impact prices, well, that is the Million Dollar Question, but only early March will tell that tale. Right now, the only impact we CAN foresee is bank loan applications being delayed/halted prior to Chinese New Year because banks are implementing new regulations to take affect March 1, 2018. The new regulations are focusing on combined auditing and accounting for both companies and banks, as for years now they have kept both internal and external books. The external books don’t show debt (outstanding loans, etc.). But all of that will change on March 1. Other regulations? We have to wait and see.”
John PackardRead more from John Packard
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