Slowing economic growth in China will most likely widen differences in the order rates of seamless tube between the energy sector and the remaining seamless pipe grades. This month tube mills were unable to cut output according to domestic demand, leading to an increase of the dependence placed on the export market. We believe that as long as the Chinese government limits its interventions to modest adjustments in credit restraints, such as the recent reduction in bank cash reserves requirements, there will be little demand revival. We see this particularlyin the construction sector's ability to absorb surplus output.In the rest of east Asia and in south-east Asia, construction demand is likely to remain slow next month, but regional demand from the energy industries and general manufacturing will continue to grow steadily. A concern however, emerges from the potential excess output in China, which exported at low prices to the nearest export markets, is likely to set a ceiling on prices of all but the highest specification seamless tube and pipes.
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