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The cost of steel in China is on the rise, as domestic steel makers raise their factory prices. But figures show that real steel consumption hasn't changed.
Steel prices in the domestic market continued to rebound this week. Data shows that in Shanghai, screw steel prices rose from 3910 yuan to 4000 yuan per ton.
It's due to domestic steel producers raising their factory prices sharply, in a short period of time. Last week Changsha Steel raised screw steel and steel wire price by 200 yuan per ton. Jiangsu Yonggang Group raised the prices by 190 yuan per ton.
This week, a total of 119 batches of steel products were sold by steel producers at higher prices.
Lin Xiaochun, Steel Future Researcher of Guotai Junan Securities said "Some steel producers are not positive about the future market prospects. They want to take advantage of this round of price rebounds to get profits."
But insiders say the current steel price hike has been triggered by speculation, not real increases in market demand. Although in the second half of July, steel consumption rose sharply, but it started to fall soon after that.
Chen Daoqu, Executive Director of Shanghai Yixiang Steel said "Many steel traders are now holding a wait and see attitude. Most of them already stored a lot of steel. If they continue to buy more from factories, their goods may be overstocked. "
According to the China Steel Association, the storage of 5 steel products in 22 major cities reached 10.8 million tons by the end of June. That's up 34 percent from the beginning of the year. Such high levels of storage were maintained in July.
Insiders say the cost of storage is about 3900 to 4000 yuan per ton. If market prices rise above that, dealers may start to sell.