According to Mr Li Zhongshuang GM of Shanghai Ruikun Materials, Chinese HRC prices probably would continue to rebound in H1 of this month, bolstered by the Baosteel's decision to keep Q4 HRC prices flat with last quarter.

    Traders have been relieved from pressure of capital limit since most of them have finished their booking. At the same time, they start to purchase material from steel makers when market sentiment improves, which are also supporting the improvement of prices.

    Mr Li believes that HRC prices would continue its rebound in September, but the following are the major reasons.

    1. There is no large room for steel makers to further cut ex works price. Baosteel has set the example for other producers. Besides, most steel mills have lower ex works price to a level which is close to market prices.

    2. Traders are not willing to reduce price. There is no meaning to cut price further as traders are not able to get any extra allowance from steel mills since they have set the new prices.

    3. Current HRC price is quite close to production cost, at which level some traders wish to get in materials. Some believe that prices are going to bottom out soon and this has led to some demand.

    4. September is midseason for steel market and the improvement in demand is expected to bolster the HRC price.

    To sum up, HRC prices tend to turn stable and there is little likelihood of great drop in the first half of September.