Predictions of a wholesale softening in Chinese flat product prices proved correct last month. Domestic prices for the vast majority of products suffered significant declines. HR coil and coated coil came under particularly severe pressure: spot prices for commodity grade HR coil dropped by as much as 45 dollars/tonne during June; HDG coil prices slumped by almost the same margin. Only thick and medium plate prices showed signs of bucking the downward market trend for flat products. The Chinese flat products market has suffered a crisis of confidence as a direct result of the string of recent changes made to China's export rebate system. Expectations that this would choke off exports and lead in turn to oversupply on the domestic market have encouraged both mills and buyers to be cautious in agreeing new price levels. While mills have been attempting to transfer some of their additional export costs to overseas buyers - not entirely successfully -, domestic buyers have taken the view that prices have further to fall. The rate of decline in prices now appears to have slowed, but MBR expects the Chinese flat products market to remain in the doldrums for much of the third quarter.
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