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Chinese HRC market to face hard day this winter
It is reported that Chinese HRC market is so sluggish that most steel makers and traders believe that they will face hard days this winter.

Most traders believe that weak market prices are going to sustain for some time. There is small likelihood that prices would see strong rebound in October, but there is no great room for further drop. Such viewpoints are based on following reasons and facts:
1. Downstream demand is likely to increase in Q4, but they are not strong enough to support great price rebound. In general, such industries as automobiles, home appliances and constructions are facing pressure of tight credit, high cost, less export order and weak domestic sales. Some small and medium sized producers even have gone bankruptcy. However, Beijing has announced to take a series of measures to support small or private enterprises so that domestic demand could improve. But it remains to be seen whether it could lead to more steel consumption.

2. Great drop in ex works price and the dive in future market have bolstered the sluggish market. Steel makers have cut ex works prices to reflect the substantial price changes on the market. At the same time, prices on future market are leading the slump, which has accelerated the market collapse.
3. International financial turmoil has cast adverse effect on steel market. The subprime debt crisis has led to great drop in house prices and further dampens the development of real estate industry in both USA and the EU, which has lowered the steel consumption. HRC ex works price in USA and Russia have fallen below USD 1000 per tonne and there is likely to be further room for decrease.

4. CR steel price decrease has also affected that of HRC.

Despite negative factors, the output cut by steel makers is expected to balance supply and demand. In addition, current price is quite close to production cost line and there is small likelihood that prices are to drop by large range.

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