The mystery of steel price plummeting amidst improving economic parameters in China can be imputed to destocking at the traders and stockiest end.
Use of steel products particularly HRC as collateral for availing credit by the market operators was common in ascending market. Players have been rushing to sell amid price falls in November despite mild uptick in demand has led to normalization of supply/demand fundamentals.
Aggregate HRC inventory nationwide posted at 3.03 million tonnes, on 23rd November down 1.32 million tonnes or 30.35% YoY.
Demand for steel primarily includes two parts financial demand and the demand and end use demand. Financial demand as collateral for loans was the major factor driving up HRC inventory in the past few years. However with the banks accumulating Non Performing Assets and default in payment by operators recently has compelled them to ease out the volumes to liquidate bad debts. Since credit has been tight the operators have been forced to swallow the bitter pill leading to glut in the market.
Ironical selling and inventory reduction has rubbed salt to injury for the market which has been losing value.
