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Cases Of Suspended Or Reduced Output At China's HR Elect Sheet Mills
China's domestic production facilities for HR electrical sheets are faced with four cases of suspended or reduced operations so far because local transaction prices of CR electrical sheets are way down to a level that compares with those of HR electrical sheets, according to information made available in Tokyo.

The first two cases represent suspended operations of two companies operating in Jiangsu province. The other two concern a 50% cutback in production from one company operating in Zhejiang province and another in Shanghai.

At present, domestic HR electrical sheets are selling at Yn3,590/ton before value-added tax or the equivalent of US$445/ton. By comparison, CR electrical sheets from Anshan Iron & Steel Group Corp are available at Yn3,750/ton before VAT or the equivalent of US$465/ton. As a result, the current price spread between HR electrical sheets and CR electrical sheets amounts to a mere Yn160 (US$20), compared with Yn1,118 (US$138) in October last year.

In this connection, it is understood that local users feel tempt to prefer CR electrical sheets, a trend that is expected to gain momentum. As to manufacturers of HR electrical sheets, they are bound to find themselves in HR coil procurement difficulties unless transaction prices of HR electrical sheets go up at a time when HR coil prices are on the upside. The going HR coil prices in China are estimated at a level of US$360-380/ton.

Under the circumstances, a shakeout could predominate in China's domestic steel mills producing HR electrical sheets in a few months from the April-June quarter of 2006, market sources suggest.

Nevertheless, it is uncertain whether market conditions for CR electrical sheets will recover fast in China even if HR electrical sheets are driven out of domestic markets, market observers believe. Among other things, they point out local inventories of CR electrical sheets that still stand at a high level on the whole.
last modified : Tue 14 Feb, 2006 [11:16]
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