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Steel Rebar Manual

 

SHANGHAI FUTURES EXCHANGE

 

 

 

 

 

 

 

 

 

 

Operation Manual for

Futures Contract Trade of Rebar, Wire Rod, Hot Rolled Coil and Steel

 

 

 

 

 

 

 

 

 

 

 

2014 Edition

Shanghai Futures Exchange

http://www.shfe.com.cn

 

 

 

 

 

 

 

Operation Manual for

Futures Contract Trade of Steel

(2014 Edition)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The contents of this manual are for reference only. For the latest information, please consult the relevant departments of Shanghai Futures Exchange (Tel: +86-21-68400000) or visit the website of the Shanghai Futures Exchange (http://www.shfe.com.cn).

 

 

 

Contents

Overview on the Types of Rebar, Wire Rod and Hot Rolled Coil       ………………….……………...4

Classification and Use of Rebar........................................................................................... 4

Classification and Use of Wire Rod...................................................................................... 5

Classification and Use of Hot Rolled Coil............................................................................. 7

National Standards and Quality Inspection of Steel................................................................ 8

Current Valid National Standards and Inspection of Rebar...................................................... 8

Current Valid National Standards and Inspection of Wire Rod................................................ 8

Currently Valid National Standards and Inspection of Hot Rolled Coil..................................... 9

Market Overview of Rebar, Wire Rod and Hot Rolled Coil.................................................... 9

Supply Situations and Characteristics of the Steel Market in China.......................................... 9

Demand Situations and Characteristics of the Steel Market in China...................................... 19

Market Demand Situations and Characteristics of Rebar and Wire Rod................................... 19

Market Demand and Characteristics of Hot Rolled Coil........................................................ 25

Analysis on the Import and Export of Steel Products in China.............................................. 30

Analysis on the Import and Export of Steel in China............................................................ 30

Analysis on the Import and Export of Rebar and Wire Rod................................................... 31

Import and Export of Hot Rolled Coil................................................................................ 33

Factors Affecting Steel Price in Market.............................................................................. 34

Main Factors Affecting Steel Price Change......................................................................... 34

Constitution of Cost of Steel............................................................................................. 38

Futures Standard Contract of Rebar, Wire rod and Hot Rolled Coil....................................... 40

Futures Standard Contract of Rebar in Shanghai Futures Exchange........................................ 40

Contract Appendix........................................................................................................... 41

Contract Appendix........................................................................................................... 43

Futures Guidelines and Related Regulations for Rebar, Wire Rod, and Hot Rolled Coil............ 46

Business Rules and Relevant Regulations of Shanghai Futures Exchange................................ 55

Appendices...................................................................................................................... 79


 

Overview on the Types of Rebar, Wire Rod and Hot Rolled Coil

Classification and Use of Rebar

 


Rebar is the common name of hot-rolled ribbed bar. There are two common classification methods: first, classification based on the geometric shape, classification or type classification according to the section shape of horizontal rib and the spacing with the rib, for example, in British standards (BS4449), rebar is classified into Type I and Type II. Such mode of classification mainly reflects the gripping performance of rebar. Second, classified based on the performance, for

example, in China national standards (GB1499.2-2007), rebar is classified into three classes according to the strength class (yield strength); in Japanese Industrial Standard (JISG3112), rebar is classified into five types according to the comprehensive performance. In addition, rebar may be classified according to the use, such as common steel bar for reinforced concrete and heat-treated steel bar for reinforced concrete etc.

 

 

 

 

 

 

 

 

 


 

At present, the executive standard for rebar in China is GB1499.2-2007, in which rebar is classified into plain hot-rolled bar and fine-grain hot-rolled bar. According to the definition of the standard, plain hot-rolled bar refers to the bar delivered in the hot-rolled status. The metallurgical structure mainly consists of ferrite and pearlite, free from the structure influencing the use performance. Fine-grain hot-rolled bar refers to the fine-grain bar formed by controlled rolling and controlled cooling process during the hot rolling process. The metallurgical structure mainly consists of ferrite and pearlite, free from the structure influencing the use performance, with the grain size no bigger than Class 9.

 

The grade number of plain hot-rolled ribbed bar is composed of HRB and characteristic value of yield strength; the grade number of fine-grain hot-rolled ribbed bar is composed of HRBF and characteristic value of yield strength. H, R and B are the initial English letters of Hot-rolled, Ribbed, Bars respectively; F is the initial English letter of Fine. The grade numbers of plain hot-rolled bar include HRB335, HRB400, HRB500; the grade numbers of fine-grain hot-rolled bar include HRBF335, HRBF400, HRBF500.

 

In addition, China GB 1499.2-2007 specifies the anti-seismic steel bar with relatively high requirements, whose identification of grade number is suffixed by E (for example, HRB400E, HRBF400E). Meeting all performance indexes of common steel bar as designated in the standard, anti-seismic steel bar shall meet the following three requirements:

 

1. The ratio of the measured tensile strength to the characteristic value of yield strength of anti-seismic steel bar shall not be less than 1.25;

2. The ratio of the measured yield strength to the characteristic value of yield strength of steel bar designated in the standard shall not be more than 1.30;

3. Maximum total elongation of steel bar shall not be less than 9%.

 

Rebar is widely used in the construction of civil works, such as house, bridge and road. It can be used in the public utilities, such as expressway, railway, bridge, culvert, tunnel, flood control and dam, and it is even the inevitable structural material for the foundation, beam, column, wall and plate of the house building. At present, high-strength rebar is widely promoted in China, and the steel consumption for Class III rebar is about 11-15% less than that for Class II rebar under the same strength and standard dimension.

 

Classification and Use of Wire Rod

 

Wire rod refers to the steel delivered in coil after hot rolling with the wire rod rolling machine, generally with the diameter 5.5-14mm. Wire rod is mainly used for architectural and drawn steel wire and the products. Due to the need of the manufacturing of standard pieces, many cold-drawn blanks are directly supplied from wire rod because the wire rod is characterized by less drawing heads than that of vertical bar, strong continuity, and high pulling efficiency. Common wire rods mostly have round section, while the wire rod with irregular section is mostly in oval, rectangular and threaded shapes, but in very small manufacturing quantity.

 

Wire rod is classified into two types according to the production process. The wire rod manufactured with double rolling mill is called general wire, which has small rod weight, about 100-200kg, and poor dimensional precision, and is mainly used in the architectural industry. Double rolling mill is designed with the eliminated rolling process. High-speed wire rod rolling mills are longitudinally arranged, and the rolling pieces are rolled on the rolling mills. One rolling mill will roll only one run, and the turning number of the roller increases in proportion with the coefficient of elongation. The high-speed wire rod rolling mill has high rolling speed, up to 120m/s, high output, small head-tail temperature difference, high product dimension precision, high quality, and large rod weight, generally 1.5-2.0 ton. At present, the newly built wire rod rolling mills in China are high-speed wire rod rolling mill.

 


With the industrial development, wire rod is more and more widely used, and the quality requirements for wire rod are increasingly strict and professional. There are wide types of steel for wire rod, including carbon structural steel, spring steel, carbon tool steel, alloy structural steel, bearing steel, alloy tool

steel, stainless steel etc. The steel that shall be processed into wire will be mostly machined into wire rod with wire rod rolling mill and then drawn into wire. Since there are many steel types and steel numbers, wire rod is usually classified into five types in the manufacturing:

 

 

 

 

 


 

Wire rod for architectural use: is mainly used for the steel bar and welded structural member of reinforced concrete, and is one type of wire rod with the largest use, and grade number HPB300; executive standard is GB1499.1-2008 Steel for the reinforcement of concrete- Part 1: Hot-rolled plain bars.

 

Flexible wire: refers to common low-carbon steel hot-rolled round wire rod, with the grade number mainly including Q195, Q215, Q235 and Q275 designated in carbon structural steel standard as well as steel No. 10, 15 and 20 in quality carbon structural steel.

 

Hard wire: refers to wire rod of quality carbon structural steel type, such as the wire rod for the steel wire for wire rope making, and wire rod for making of steel wire for tyre. Hard wire generally has high carbon content, and generally refers to quality carbon structural steel above No. 45, 40Mn-70Mn, etc.

 

Bonding wire: refers to wire rod for welding, including carbon welding rod steel and wire rod for alloy welding rod steel.

 

Alloy steel wire rod: refers to various types of special wire rod with alloy steel and high alloy content, such as bearing steel wire rod, alloy structural steel, stainless steel, alloy tool steel wire rod, etc. Low-alloy steel wire rod is generally classified as hard wire, and may be classified as alloy steel type in case of any special performance.

 

Classification and Use of Hot Rolled Coil

Hot rolled coil is strip steel made with plate blank (mainly continuous casting blank) as the raw material, by rolling with roughing mill set and finishing mill set after the heating with heating oven (or uniform heating with uniform heating oven). Hot steel strip of hot rolled coil from the final rolling mill through finish rolling is cooled down to the set temperature through the laminar flow, for the making of hot-rolled steel strip by the coiling machine. Hot rolled coil includes the steel strip (coil) and the steel plate cut from steel strip (coil). Steel strip (coil) can be classified into direct-delivery coil and finishing coil (divided coil, leveling coil and longitudinal cut coil).

 

Hot rolled coil generally consists of medium-thickness wide steel strip, hot-rolled thin and wide steel strip and hot-rolled sheet. Medium-thickness wide steel strip is the most typical type, whose output accounts for about two thirds of total output of hot rolled coil, the object of the futures contract for hot rolled coil of Shanghai Futures Exchange to be listed belongs to medium-thickness wide steel strip.

 

Medium-thickness wide steel strip refers to the steel strip manufactured with continuous wide strip steel hot rolling machine or oven coil rolling mill and delivered in coil, with the thickness≥3mm and < 20mm, width≥600mm.

 

Hot-rolled thin and wide steel strip refers to steel strip manufactured with continuous wide strip steel hot rolling machine or oven coil rolling mill and delivered in coil, with the thickness<3mm and width≥600mm.

 

Hot-rolled sheet refers to the single steel sheet with the thickness <3mm. Hot-rolled sheet is usually steel strip manufactured with continuous wide strip steel hot rolling mill and sheet blank continuous casting equipment and delivered in coil.

 


Hot rolled coil may be classified into common structural carbon steel, low-alloy steel and alloy steel by the material and performance. It can be classified by category into cold-forming steel, structural steel, automotive structural steel, anti-corrosion structural steel, mechanical structural steel, steel for welding of gas cylinder and pressure

vessel, steel for pipeline, etc. Hot rolled coil product has high strength, good ductility, easiness for processing and forming and good weldability, and is widely used in the manufacturing

 

 

 

 

 

 

 

 

 

 

 

 

 

 


industries, such as cold-rolled substrate, ship, automobile, bridge, building, machinery, oil transmission pipeline, pressure vessel.


 


National Standards and Quality Inspection of Steel

The national standards for the rebar and the wire rod (plain steel bar) for architectural use are national mandatory standards; all the manufactured products shall comply with the related standards. National standards for wire rod and hot rolled coil other than for architectural use are recommendatory standards. During the manufacturing, the enterprises use the national standards, and some steel plants use industry standards or enterprise standard.

 

Current Valid National Standards and Inspection of Rebar

GB1499.1-2008 Steel for the Reinforcement of Concrete- Part 1: Hot Rolled Plain Bars

GB1499.1-2008 Steel for the Reinforcement of Concrete- Part 1: Hot Rolled Plain Bars- Modification list No. 1 for China National Standard

GB1499.2-2007 Steel for Reinforcement of Concrete –Part 2: Hot Rolled Ribbed Bar

GB/T1499.3-2002 Welded Steel Fabric for the Reinforcement of Concrete

 

Current Valid National Standards and Inspection of Wire Rod

For the wire rod (plain steel bar) for architectural use:

GB1499.1-2008 Steel for the Reinforcement of Concrete- Part 1: Hot Rolled Plain Bars

GB1499.1-2008 Steel for the Reinforcement of Concrete- Part 1: Hot Rolled Plain Bars- Modification list No. 1 for China National Standard

 

National standards and industry standards of wire rod other than for architectural use include:

GB/T14981-2009 Dimension, Shape, Mass and Tolerance for Hot Rolled Round Wire Rod

GB/T701-2008 Hot Rolled Low Carbon Steel Wire Rods

GB/T4354-1994 Hot Rolled Quality Carbon Steel Wire Rods

GB/T3429-2002 Steel Wire Coil for Welding

GB/T4241-2006 Stainless Steel Wire Rods for Welding

GB/T4356-2002 Stainless Steel Sire Rods

YB/T146-1998 Hot Rolled Wire Rods for Prestressed Steel Wires and Wire Ropes

YB/T170.1-2000 Non-alloy Steel Rods for Conversion to Wire- Part 1: General Requirements

YB/T170.2-2000 Non-alloy Steel Rods for Conversion to Wire- Part 2: Specific Requirements for General Purpose Wire Rod

YB/T170.3-2002 Non-alloy Steel Rods for Conversion to Wire- Part 3: Specific Requirements for Rimmed and Rimmed-substitute Low Carbon Steel Wire Rod

YB/T170.4-2002 Non-alloy Steel Rods for Conversion to Wire- Part 4: Specific Requirements for Wire Rod for Special Applications

YB/T5100-1993 Piano Wire Rods

YB/T5365-2006 Hot Rolled Wire Rod for Quenched and Tempered Springs (former GB/T19530-2004)

 

Currently Valid National Standards and Inspection of Hot Rolled Coil

GB/T247—2008 General Rule of Package, Mark and Certification for Steel Plates (sheets) and Strips

GB/T709—2006 Dimension, Shape, Weight and Tolerances for Hot-rolled Steel Plates and Sheets

GB/T710—2008 Hot Rolled Quality Carbon Structural Steel Sheets and Strips

GB/T711—2008 Hot-rolled Quality Carbon Structural Steel Plates, Sheets and Wide Strips

GB912—2008 Hot Rolled Sheets and Strips of Carbon Structural Steel and High-strength Low-alloy Structural Steel

GB/T3274—2007 Hot Rolled Plates and Strips of Carbon Structural Steel and High-strength Low-alloy Structural Steel

GB/T4237—2007 Hot Rolled Stainless Steel Plate, Sheet and Strip

GB/T20887.1—2007 Continuously Hot Rolled High Strength Steel Sheet and Strip for Automobile--Part 1: High Yield Strength Steel for Cold Forming

GB/T20887.2—2010 Continuously Hot Rolled High Strength Steel Sheet and Strip for Automobile--Part 2: High Hole Expansion Steel

GB/T20887.3—2010 Continuously Hot Rolled High Strength Steel Sheet and Strip for Automobile --Part 3: Dual Phase Steel

GB/T20887.4—2010 Continuously Hot Rolled High Strength Steel Sheet and Strip for Automobile --Part 4: Transformation Induced Plasticity Steel

GB/T20887.5—2010 Continuously Hot Rolled High Strength Steel Sheet and Strip for Automobile --Part 5: Martensitic Steel

GB/T8749—2008 Hot Rolled Quality Carbon Structural Steel Strips

GB/T14164-2005 Hot Rolled Wide Strips for Line Pipe of Petroleum and Natural Gas

 

Market Overview of Rebar, Wire Rod and Hot Rolled Coil

Supply Situations and Characteristics of the Steel Market in China

Output Supply Situations and Characteristics of Crude Steel and Steel in China

 

Before the financial crisis in 2008, crude steel and steel in China kept high growth. In 2005, 2006 and 2007, crude steel output growth rates were up to 24.6%, 18.5% and 15.7% respectively; steel output growth rates are up to 24.1%, 24.5% and 22.7% respectively. Due to the influence of financial crisis, crude steel and steel output growth rate in China in 2008 decreased to 1.1% and 3.6% respectively. Since 2009, crude steel and steel output growth rate in China has gradually decreased. According to the public data from National Bureau of Statistics of the People’s Republic of China, crude steel output in China in 2013 was 779.04 million ton, with the growth rate 7.5% by comparison with that in the previous year, and with the growth rate 123% by comparison with that in 2005, compound annual growth rate 10.5%; steel output was 1,067.62 million ton, with the growth rate 11.4% by comparison with that in the previous year, with the growth rate 187.6% by comparison with that in 2005, and with compound annual growth rate 14.1%.

 

Output and growth of crude steel and steel in China in 2005-2013

Source: National Bureau of Statistics of the People’s Republic of China

 

The provinces and municipalities with the largest crude steel output in China are Hebei Province, Jiangsu Province and Shandong Province, and the crude steel output in 2013 was 188.496 million ton, 84.691 million ton and 61.198 million ton respectively, accounting for 24.2%, 10.9% and 7.9% of national crude steel output respectively. Crude steel output of top 10 provinces and municipalities was 563.524 million ton, accounting for 72.3% of total output of crude steel. Refer to the table below for the crude steel output of top 10 provinces and municipalities in China in 2011-2013.

 

Crude steel outputs of top 10 provinces and municipalities in China in 2011-2013 (Unit: 10,000 tons)

No.

Provinces and municipalities

2011

2012

Growth rate %

2013

Growth rate %

1

Hebei

16999.5

18048.4

6.2

18849.6

3.5

2

Jiangsu

6868.6

7419.7

8

8469.1

10.6

3

Shandong

5840.3

5957

2

6119.8

2.7

4

Liaoning

5314

5177

-2.6

5972.9

15.4

5

Shanxi

3610.2

3950.1

9.4

4519.6

14

6

Hubei

2937.3

2806.7

-4.4

2887.8

0.3

7

Henan

2395.4

2215.8

-7.5

2736

19.4

8

Anhui

2076.5

2147

3.4

2351.5

9.5

9

Tianjin

2295.7

2124.2

-7.5

2289.5

7.8

10

Jiangxi

2085.4

2140.9

2.7

2156.6

0.8

Other provinces and municipalities

19058.3

19667.4

3.2

21551.7

8.3

Total

69481.2

71654.2

3.1

77904.1

7.5

Source: National Bureau of Statistics of the People’s Republic of China

 

The provinces and municipalities with the highest steel output in China are Hebei Province, Jiangsu Province and Shandong Province in sequence. Their steel output in 2013 was 228.616 million ton, 123.98 million ton and 81.091 million ton respectively, accounting for 21.4%, 11.6% and 7.6% of national steel output respectively. Steel output of top 10 provinces and municipalities was 761.668 million ton, accounting for 71.3% of total national steel output. Refer to the table below for the steel output of top 10 provinces and municipalities in China 2011-2013.

 

Steel output of top ten provinces and municipalities in China in 2011-2013 (Unit: 10,000 tons)

No.

Provinces and municipalities

2011

2012

Growth rate %

2013

Growth rate %

1

Hebei

19189.5

20995.2

9.4

22861.6

8.7

2

Jiangsu

10008.3

10989.2

9.8

12398

12.7

3

Shandong

7176.5

7817.9

8.9

8109.1

4.6

4

Liaoning

5890.6

5916.1

0.4

6863

15.3

5

Tianjin

5093.9

5708.6

12.1

6640.9

15.4

6

Shanxi

3397.4

3797.6

11.8

4486.2

18.1

7

Henan

3293.7

3481.4

5.7

4255.2

18.7

8

Zhejiang

3178.2

3361.3

5.8

3823.4

13.1

9

Guangdong

2912

2993

2.8

3384.5

12.3

10

Hubei

3665.2

3558.4

-2.9

3344.9

-5.8

Other provinces and municipalities

24610.3

26567.4

8

30595.4

13.1

Total

88415.6

95186.1

7.7

106762.2

11.4

Source: National Bureau of Statistics of the People’s Republic of China

 

Market Supply Situations and Characteristics of Rebar and Wire Rod

Except for the influence of international financial crisis in 2008, the output of rebar and wire rod in China decreased slightly, maintaining generally rapid growth rate. In 2013, the rebar output in China was 206.192 million ton, with the growth rate of 204.3% by comparison with that in 2005, and the compound annual growth rate was up to 14.9%; in 2013, wire rod output in China was 150.893 million ton, with the growth rate of 149.4% by comparison with that in 2005, and the compound annual growth rate was up to 12.1%.

 

Rebar output and growth in China in 2005-2013

Source: National Bureau of Statistics of the People’s Republic of China

 

Wire rod output and growth in China in 2005-2013

Source: National Bureau of Statistics of the People’s Republic of China

 

The provinces and municipalities with highest rebar output in China are Jiangsu, Hebei and Shandong in sequence. Their rebar output in 2013 was 30.371 million ton, 24.518 million ton and 13.702 million ton respectively, accounting for 14.7%, 11.9% and 6.6% respectively of national rebar output. The rebar output of top 10 provinces and municipalities was 139.001 million ton, accounting for 67.4% of total national rebar output. Refer to the table below for the rebar output of top 10 provinces and municipalities in China in 2011-2013.

 

Output of rebar in top 10 provinces and municipalities in China in 2011-2013 (Unit: 10,000 tons)

No.

Provinces and municipalities

2011

2012

Growth rate %

2013

Growth rate %

1

Jiangsu

2184.9

2775.8

27

3037.1

9.4

2

Hebei

1757.5

2089.9

18.9

2451.8

15.6

3

Shandong

1015.3

1059.9

4.4

1370.2

-2.3

4

Guangdong

882.2

1000.2

13.4

1271.3

25.2

5

Anhui

898.7

1047.4

16.5

1231.1

21.2

6

Sichuan

839.3

889.6

6

1016.8

12.2

7

Yunnan

657.1

783.9

19.3

954.2

21.7

8

Fujian

464.8

550.2

18.4

904.3

23.8

9

Jiangxi

639.5

726.5

13.6

853.4

17.1

10

Shanxi

637.7

798.3

25.2

809.9

1.5

Other provinces and municipalities

5279.3

5816

10.2

6719.1

15.0

Total

15256.3

17537.7

15

20619.2

13.8

Source: National Bureau of Statistics of the People’s Republic of China

 

The provinces and municipalities with highest wire rod output in China are Hebei, Shanxi and Jiangsu respectively, the wire rod output in 2013 was 27.302 million ton, 18.205 million ton and 14.793 million ton respectively, accounting for 18.1%, 12.1% and 9.8% of national wire rod output respectively, in which Shanxi wire rod output achieved high growth rate, and rose to No. 2 nationwide beyond Jiangsu Province in 2013. The wire rod output of top 10 provinces and municipalities was 111.899 million ton, accounting for 74.2% of total national wire rod output. Refer to the table below for the wire rod output of top 10 provinces and municipalities in China in 2011-2013.

 

Output of wire rod for top 10 provinces and municipalities in China in 2011-2013 (Unit: 10,000 tons)

No.

Provinces and municipalities

2011

2012

Growth rate %

2013

Growth rate %

1

Hebei

2410.2

2793.4

15.9

2730.2

-1.7

2

Shanxi

993.5

1280.4

28.9

1820.5

42.2

3

Jiangsu

1365.7

1330.5

-2.6

1479.3

11.2

4

Henan

848

1015.4

19.7

1160.0

13.4

5

Shandong

781.5

849.3

8.7

969.0

14.5

6

Liaoning

681.7

664.1

-2.6

750.5

13.0

7

Guangxi

318.5

482.8

51.6

617.8

28.0

8

Fujian

340.4

415.4

22

569.0

15.5

9

Guangdong

586.7

527.3

-10.1

567.3

8.0

10

Yunnan

391.1

436.6

11.6

525.3

20.3

Other provinces and municipalities

3435.5

3820.9

11.2

3900.4

-0.3

Total

12152.8

13616.1

12

15089.3

9.6

Source: National Bureau of Statistics of the People’s Republic of China

 

Rebar and wire rod have low concentration and full market competition

Regional characteristics highlight low production capacity of rebar and wire rod in China. According to the statistics of China Iron and Steel Association (CISA), the rebar output of top 10 iron and steel enterprises in 2013 was 76.538 million t, accounting for 37.1% of national output, with the decrease of 6.6% by comparison with that in 2009; in 2013, the wire rod output in top 10 iron and steel enterprises was 38.923 million t, accounting for 25.8% of national output, with the decrease of 12.1% by comparison with that in 2009. Main reason for decrease of concentration of rebar and wire rod is rapid growth of production capacity in the private steel enterprises after 2009, and the added production capacity is mainly reflected by long rod, such as rebar and wire rod.

 

According to the incomplete statistics of SteelHome website, more than 220 iron and steel enterprises in China have the rebar production capacity, more than 140 steel plants have the production capacity of wire rod. Most of these enterprises mainly launch the sales in the neighboring regions of the steel plant, and the regional characteristics are outstanding. From the national market, rebar and wire rod basically have the full competition market.

 

Top 10 iron and steel enterprises on the output of rebar in China in 2009 and 2013 (Unit: 10,000 tons)

No.

Iron and steel enterprise

2009

Iron and steel enterprise

2013

1

Hebei Iron and Steel Group Co., Ltd.

836.6

Hebei Iron and Steel Group Co., Ltd.

1080.3

2

Shandong Iron and Steel Group Co., Ltd.

821.7

Wuhan Iron and Steel (Group) Corp.

1014.7

3

Wuhan Iron and Steel (Group) Corp.

686.9

Jiangsu Shagang Group Co., Ltd.

1013.6

4

Jiangsu Shagang Group Co., Ltd.

679.1

Shandong Iron and Steel Group Co., Ltd.

813.8

5

Shougang Group

516.8

Fangda Iron and Steel Group Co., Ltd.

743.2

6

Baosteel Group Corporation

472.0

Shougang Group

694.8

7

Pingxiang Iron and Steel Co., Ltd.

368.3

Magang (Group) Holding Co., Ltd.

600.2

8

Beijing Jianlong Heavy Industry Group Co., Ltd.

333.8

Baosteel Group Corporation

582.2

9

Jiuquan Iron and Steel (Group) Co., Ltd.

305.2

Hebei Jingye Group

559.2

10

Xinxing Ductile Iron Pipes Co., Ltd.

289.9

Shaanxi Iron and Steel (Group) Co., Ltd.

551.8

 

Total of top ten

5310.3

Total of top ten

7653.8

National output

12150.6

National output

20619.2

Percentage of top 10

43.7%

Percentage of top 10

37.1%

Source: China Iron and Steel Association (CISA)

 

Top 10 iron and steel enterprises on the output of wire rod in China in 2009 and 2013 (Unit: 10,000 tons)

No.

Iron and steel enterprise

2009

Iron and steel enterprise

2013

1

Jiangsu Shagang Group Co., Ltd.

648.5

Jiangsu Shagang Group Co., Ltd.

817.3

2

Hebei Iron and Steel Group Co., Ltd.

532.6

Hebei Iron and Steel Group Co., Ltd.

599.7

3

Wuhan Iron and Steel (Group) Corp.

356.3

Hebei New Wu’an Iron and Steel Group Co., Ltd.

409.8

4

Baosteel Group Corporation

346.8

Fangda Iron and Steel Group Co., Ltd.

372.1

5

Shougang Group

345.8

Wuhan Iron and Steel (Group) Corp.

334.9

6

Beitai Iron & Steel (Group) Co., Ltd.

342.0

Benxi Steel Group Corporation

296.1

7

Hebei New Wu’an Iron and Steel Group Co., Ltd.

323.8

Baosteel Group Corporation

286.9

8

Xingtai Iron & Steel Corp., Ltd.

247.6

Rizhao Steel Holding Group Co., Ltd.

266.5

9

Pingxiang Iron and Steel Co., Ltd.

247.0

Xingtai Iron & Steel Corp., Ltd.

258.3

10

Hunan Valin Iron and Steel Group Co., Ltd.

244.8

Shanxi Zhongyang Iron & Steel Co., Ltd.

250.7

 

Total of top ten

3635.3

Total of top ten

3892.3

National output

9585.7

National output

15089.3

Percentage of top 10

37.9%

Percentage of top 10

25.8%

Source: China Iron and Steel Association (CISA)

 

Market Supply Situations and Characteristics of Hot Rolled Coil

Since 2005, growth rate of hot rolled coil output in China faced the stepped decrease. In 2005-2007, the output achieved rapid growth, with the growth rate at 32.4%-36.1%; in 2008-2010, the growth rate decreased to 13.1%-19.4%, but was still relatively high; in 2011-2012, the growth rate further decreased to 4.6-6.7%, and had slight increase in 2013. In 2013, hot rolled coil output in China was 182.707 million ton, with the growth rate 251.9% by comparison with that in 2005, and compound annual growth rate up to 17%.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hot rolled coil output and growth in China in 2005-2013

Source: National Bureau of Statistics of the People’s Republic of China

 

From the output of provinces and municipalities, the provinces and municipalities with the highest hot rolled coil output in China were Hebei, Liaoning and Jiangsu. Their hot rolled coil output in 2013 was 57.285 million ton, 21.957 million ton and 17.527 million ton respectively, accounting for 31.4%, 12% and 9.5% respectively of national hot rolled coil output. In 2013, the output of top 10 provinces and municipalities with the highest hot rolled coil output in China was 147.535 million ton, accounting for 80.7% of total hot rolled coil output. Refer to the table below for the output of top 10 provinces and municipalities with the highest hot rolled coil output in China in 2011-2013.

 

Top 10 provinces and municipalities with the highest hot rolled coil output in China in 2011-2013 (Unit: 10,000 tons)

No.

Provinces and municipalities

2011

2012

Growth rate %

2013

Growth rate %

1

Hebei

5136.1

5332.1

3.8

5728.5

6.9

2

Liaoning

1859.1

1901.5

2.3

2195.7

15.5

3

Jiangsu

1394.6

1679.2

20.4

1752.7

4.4

4

Shandong

1123.7

1381.2

22.9

1380.4

-0.1

5

Tianjin

845.7

783.4

-7.4

932.3

13.1

6

Zhejiang

584.4

594.9

1.8

639.4

7.5

7

Hubei

582.9

607.8

4.3

636.9

4.8

8

Shanxi

549.6

534.7

-2.7

551.2

3.1

9

Shanghai

604.4

495.9

-18

513.2

2.8

10

Guangxi

406.5

534.8

31.6

423.2

-1.6

Other provinces and municipalities

2560

2844.4

11.1

3517.2

23.8

Total

15647

16689.9

6.7

18270.7

9.7

Source: National Bureau of Statistics of the People’s Republic of China

 

The concentration of the production capacity of hot rolled coil is relatively high

From the concentration of production capacity, the concentration of production capacity of hot rolled coil is obviously higher than that of rebar and wire rod. But from 2009 to 2013, the percentage of the output of top 10 steel plants in hot rolled coil (commodity wire rod) in China in the national output generally decreased. In 2013, the output of top 10 iron and steel enterprises in hot rolled coil (commodity wire rod) was 95.378 million ton, accounting for 52.2% of total national output, with the decrease of 4% by comparison with that in 2009.

 

Output of hot rolled coil of top 10 iron and steel enterprises in China in 2009 and 2013 (Unit: 10,000 tons)

No.

Iron and steel enterprise

2009

Iron and steel enterprise

Year 2013

1

Anshan-Benxi Iron and Steel Group

1372.2

Baosteel Group Corporation

1407.2

2

Baosteel Group Corporation

1150.6

Anshan Iron and Steel Group Corporation

1375.2

3

Hebei Iron and Steel Group Co., Ltd.

840.8

Wuhan Iron and Steel (Group) Corp.

1076.4

4

Wuhan Iron and Steel (Group) Corp.

700.4

Hebei Iron and Steel Group Co., Ltd.

1009.7

5

Rizhao Steel Holding Group Co., Ltd.

539.2

Handan Zongheng Iron & Steel Group Co., Ltd.

1000.8

6

Taiyuan Iron & Steel (Group) Co., Ltd.

537.5

Shougang Group

963.2

7

Jiangsu Shagang Group Co., Ltd.

493.3

Benxi Iron &  Steel (Group) Co., Ltd.

854.6

8

Handan Zongheng Iron & Steel Group Co., Ltd.

482.9

Jiangsu Shagang Group Co., Ltd.

841.7

9

Tangshan Guofeng Iron and Steel Co., Ltd.

343.8

Taiyuan Iron & Steel (Group) Co., Ltd.

523.5

10

Hebei New Wu’an Iron and Steel Group Co., Ltd.

276.6

Bohai Steel Group Co., Ltd.

485.7

 

Total of top ten

6737.3

Total of top ten

9537.8

National output

11994.2

National output

18270.7

Percentage of top 10

56.2%

Percentage of top 10

52.2%

Source: China Iron and Steel Association (CISA)

 

Demand Situations and Characteristics of the Steel Market in China

Market Demand Situations and Characteristics of Rebar and Wire Rod

Rebar is one of the steel types with the largest output in China, is mainly used for the civil construction engineering, such as real estate, bridge, and road, and has close relations with the infrastructure construction investment. Since 2005, from the comparison chart of wire rod resource supply and investment increase rate, it may be seen that except the influence of financial crisis in 2008, the growth rate of rebar and wire rod decreased sharply (mainly because of significant decrease of the output of the steel plant in the second half of 2008). The growth rate of rebar supply and wire rod has close direct correlation with the growth rate of fixed asset investment. Particularly since the outbreak of the international financial crisis in 2008, the pull of domestic investment demand triggered the growth of the architectural steel demand, and the output growth rate of rebar and wire rod was higher than the growth rate of the output of steel in the same period.

 

 

 

 

 

 

 

 

 

 

 

 

Comparison of the bar resource supply and investment growth rate in 2005- July, 2013

Source: National Bureau of Statistics of the People’s Republic of China

 

The sales of rebar and wire rod mainly depend on the market circulation, and the price is basically close to that in the non-futures market

 

The sales of rebar in China mainly depend on the market circulation. According to the statistical data of China Iron and Steel Association (CISA), the products sold by the key iron and steel enterprises through the circulation channels in 2010-2013 accounted for 64.8%-67.3%, and the direct delivery accounts for only about 20%. If the sales by the branch of the steel plant also mainly depend on the market circulation, the market circulation of rebar sales accounts for nearly 80%.

 

Same as that for rebar, the sales of wire rod in China mainly depends on the market circulation. According to the statistical data of China Iron and Steel Association (CISA), the products sold by the key iron and steel enterprises through the circulation channels in 2010-2013 accounted for 52%-55.3%, and the direct delivery percentage is 30.7-32.8%, slightly higher than that of rebar, mainly because the direct delivery percentage of wire rod for metal products is relatively high. Since the sales of rebar and wire rod mainly depends on the market circulation and is characterized by regional sales, and the pricing of the steel plant mainly refers to the non-futures price in the target market, and is characterized by short pricing period, mainly close to the market price.

 

Sales of rebar by key enterprises by channels in 2010-2013 (Unit: 10,000 tons)

Rebar

2010

2011

2012

January-November, 2013

Sales

8654.0

9917.0

11607.1

12436.6

Where, direct delivery

1625.7

2202.0

2420.5

2689.3

Percentage

18.8%

22.2%

20.9%

21.6%

Branch

1136.4

1231.1

1253.0

1551.2

Percentage

13.1%

12.4%

10.8%

12.5%

Circulation

5827.5

6429.9

7745.5

7969.6

Percentage

67.3%

64.8%

66.7%

64.1%

Export

64.4

54.0

188.2

226.5

Percentage

0.7%

0.5%

1.6%

1.8%

Source: China Iron and Steel Association (CISA)

 

Sales of wire rod by key enterprises by channels in 2010-2013 (Unit: 10,000 tons)

Wire rod

2010

2011

2012

January-November, 2013

Sales

6074.0

6474.2

6564.1

6542.5

Where, direct delivery

1962.1

2122.3

2014.7

1939.1

Percentage

32.3%

32.8%

30.7%

29.6%

Branch

746.1

631.1

534.6

738.3

Percentage

12.3%

9.7%

8.1%

11.3%

Circulation

3160.9

3479.0

3631.0

3417.8

Percentage

52.0%

53.7%

55.3%

52.2%

Export

204.9

241.9

383.8

447.2

Percentage

3.4%

3.7%

5.8%

6.8%

Source: China Iron and Steel Association (CISA)

 

Seasonal change of rebar and wire rod, winter storage and north-south transportation are the obvious characteristics in the winter sales

 

The production and sales of various types of steel had the conflict between continuous product and phase demand, but more obvious in the architectural steel mainly reflected by rebar and wire rod. In every winter, the construction sites in the northeast, northwest and northern China regions stop the construction, and the local demand decreases largely and even stops, but the production in the steel plant continues. Facing large decrease of local demand, the steel plants usually take two measures to digest the output: first, storage in the winter, including the storage of the inventory by the steel plants and local steel traders, for the sales in the high season of the market, to win the price difference. But in recent two years, with rapid growth of the production capacity of rebar and wire rod, the winter storage of steel has been very hard to result in good benefit, thus the steel traders are less active in winter storage; second, north-south transportation, mainly delivered to eastern and southern China. For either winter storage or north-south transportation, the steel plants generally yield certain profit in warrant to digest the output.

 

 

Change of rebar inventory in main domestic markets in 2010-2013 (Unit: 10,000 tons)

Source: SteelHome

  

Change of wire rod inventory in main domestic markets in 2010-2013 (Unit: 10,000 tons)

Source: SteelHome

 

Eastern China is the largest rebar production and consumption region in China

Eastern China is the largest rebar production and consumption region in China. According to the data of National Bureau of Statistics of the People’s Republic of China, the output of rebar in China in 2013 was 206.192 million ton, and the output of rebar in Eastern China region was 75.057 million ton, accounting for 36.4% of national output, while the rebar output in northern China and central south China regions accounted for 18.7% and 19.6% of national output respectively. Though the rebar output in western China region accounted for small percentage, it increased year by year. In 2013, the rebar output in southwest and northwest accounted for 11.7% and 6.6% of national rebar output respectively, with the increase of 2.8% and 0.6% respectively by comparison with that in 2005.

 

According to the statistical data of China Iron and Steel Association (CISA), the rebar output of key enterprises in January-November, 2013 was 124.366 million ton, in which the output flowing to Eastern China region was 42.998 million ton, accounting for 34.6% of total statistical quantity. With respect to the distribution regions of the output, Eastern China is the largest rebar production region in China, and is also the largest consumption region in China, achieving basic regional balance of production and sales. The output flowing into northern China region was 18.909 million ton, accounting for 15.2% of total statistical quantity, lower than the output percentage 18.7% in 2013, thus northern China was the net outflow region of rebar. The output flowing into central south China was 24.076 million ton, accounting for 19.4% of total statistical quantity, basically equal to the output percentage, thus the supply and demand of rebar production and sales in central south China region was basically balanced.

 

Distribution of the zones for rebar output in China in 2013

Source: National Bureau of Statistics of the People’s Republic of China

 

Distribution of the zones flow for rebar in China in January-November, 2013

Source: China Iron and Steel Association (CISA)

 

Northern China is the largest wire rod production region and Eastern China is the largest wire rod consumption region in China

Northern China is the largest wire rod production region. According to the public data of National Bureau of Statistics of the People’s Republic of China, wire rod output in China in 2013 was 150.893 million ton, in which the output in northern China region was 51.179 million ton, accounting for 33.9% of total national output, the wire rod output in Eastern China and Central South China accounted for 27.7% and 18.8% respectively. The output in Northeast China, Southwest China and Northwest China accounted for 7.6%, 6.7% and 5.2% of national output respectively.

 

Eastern China is the largest wire rod consumption region in China. according to the data of China Iron and Steel Association (CISA), the wire rod output of key enterprises in January-November, 2013 was 65.425 million ton, in which the output flowing to Eastern China region was 24.166 million ton, accounting for 36.9% of the statistical quantity; the output flowing to Northern China was 13.023 million ton, accounting for 19.9% of the statistical quantity. In combination with the national output data, Eastern China region was the net inflow region of wire rod, and Northern China was the net outflow region in China.

 

Distribution of the zones for wire rod output in China in 2013

Source: National Bureau of Statistics of the People’s Republic of China

 

Distribution of the zones flow for wire rod in key enterprises in January-November, 2013

Source: China Iron and Steel Association (CISA)

 

Market Demand and Characteristics of Hot Rolled Coil

Coil sheet maintained rapid growth

Since 2005, the growth rate of hot rolled coil output in China achieved the stepped decrease. In 2011, the growth rate of hot rolled coil in China was only 4.6%, and in 2013, the growth rate rose up to 9.7%, which was obviously lower than the growth rate before 2011. With respect to the specification, due to the pull of cold-drawn coil plate demand, the output of hot-rolled coil sheet maintained rapid growth. After 2011, with large decrease of hot rolled coil growth rate, the growth rate of hot-rolled coil sheet was obviously higher than that of medium-thickness wide steel strip.

 

Hot rolled coil and its output and growth by specification in China in 2005-2013 (Unit: 10,000 tons)

Type

2005

2006

2007

2008

2009

2010

2011

2012

2013

Hot-rolled   coil

Output

5192

6820.2

8651.7

9959.1

11994.2

14669.8

15714

16689.9

Growth rate %

36.1

32.4

35.3

13.1

17.8

19.4

4.6

6.7

Hot-rolled  coil sheet

Output

1485

2305.3

2353.7

2594.6

3610.5

4380.6

5210.2

5823.7

Growth rate %

30.9

61.7

27

4

30.3

18.3

19

19.5

Medium-thickness steel strip

Output

3707.1

4514.8

6298

7364.47

8383.8

10289.2

10503.8

10866.2

Growth rate %

38.3

21.2

38.7

16.7

13.2

19.9

-1.3

0.8

Source: National Bureau of Statistics of the People’s Republic of China

 

Export has certain effect on mitigating the domestic supply-demand conflict

Before 2005, the hot rolled coil in China was always in the net import status. According to the customs statistics, the import of hot rolled coil by China in 2005 was 5.816 million ton, and the export was 4.04 million ton, thus net import was 1.776 million ton. Since 2006, with rapid growth of domestic production capacity, the status of hot rolled coil was changed into net export. In 2006-2008, the export quantity of hot rolled coil in China was over 10% of total national output, thus effectively mitigating the supply-demand conflict in domestic market. Since the outbreak of international financial crisis, with the decrease of international market demand and the cancelation of export tariff reduction for hot rolled coil in China, the export quantity of hot rolled coil in 2009 decreased to certain extent, and after 2010, the export quantity kept relatively high level, having certain effect on mitigating the supply-demand conflict in domestic market.

 

Northern China is the largest hot rolled coil manufacturing region in China. Eastern China is the largest consumption region

Northern China is the largest hot rolled coil manufacturing region in China. According to the public data of National Bureau of Statistics of the People’s Republic of China, hot rolled coil output in China in 2013 was 182.707 million ton, in which the output in Northern China region was 74.195 million ton, accounting for 40.6% of national output, the output in Eastern China region was 4883.6 million t, accounting for 26.7% of national output, and the output in Northeast China region was 26.733 million t, accounting for 14.6% of national output. The output in Central South China, Southwest China and Northwest China regions accounted for 10.6%, 5.2% and 2.2% of national output respectively.

 

With respect to the consumption region, Eastern China is also the largest hot rolled coil consumption region. According to the data of China Iron and Steel Association (CISA), the output of hot rolled coil in key iron and steel enterprises in January-November, 2013 was 116.674 million ton, in which the output flowing into Eastern China region was 42.223 million ton, accounting for 36.2% of statistical quantity, and Eastern China is the largest hot rolled coil consumption region. The output flowing into Northern China region was 31.239 million ton, accounting for 26.8% of statistical quantity, and Northern China is the second largest hot rolled coil consumption region in China.

 

Distribution of the zones for the hot rolled coil output in 2013     

Source: National Bureau of Statistics of the People’s Republic of China

 

Distribution of the zones flow for hot rolled coil in key enterprises in January-November, 2013

Source: China Iron and Steel Association (CISA)

      

Direct delivery percentage of hot rolled coil increased gradually, and circulation percentage decreased

In recent years, direct delivery percentage of hot rolled coil in China gradually increased, and the percentage for the sales in the circulation market decreased. According to the statistical data of China Iron and Steel Association (CISA), January-November, 2013 hot rolled coil direct delivery percentage 38.2%, with the increase of 21.5% by comparison with that in 2005, and the circulation percentage decreased from 60.3% in 2005 to 43.8%. Main reason for the increase of direct delivery percentage is relatively high concentration of hot rolled coil. Major steel plants, such as Baosteel, Anshan Steel, and WISC, have improved their direct delivery percentages.

 

Sales of hot rolled coil by channels in 2005 - January-November, 2013 (Unit: 10,000 tons)

Hot rolled coil

2005

2006

2007

2008

2009

2010

2011

2012

January-November, 2013

Sales

4368.7

5307.3

7036.6

7703.8

5277.1

10820.1

10634.7

11129.7

11667.4

Direct delivery

727.9

1630.6

2331.7

2249.7

1548.4

3587.7

4033.6

4026.8

4460.3

Percentage

16.7%

30.7%

33.1%

29.2%

29.3%

33.2%

37.9%

36.2%

38.2%

Branch

684.9

741.3

1209.3

1397.1

1061.4

1708.5

1819.0

1919.8

1600.7

Percentage

15.7%

14.0%

17.2%

18.1%

20.1%

15.8%

17.1%

17.2%

13.7%

Circulation

2635.0

2253.0

2656.1

3121.2

2565.0

4778.9

4372.0

4632.9

5111.9

Percentage

60.3%

42.5%

37.7%

40.5%

48.6%

44.2%

41.1%

41.6%

43.8%

Export

320.9

682.3

839.6

935.9

102.4

744.9

410.2

550.2

494.5

Percentage

7.3%

12.9%

11.9%

12.1%

1.9%

6.9%

3.9%

4.9%

4.2%

Source: China Iron and Steel Association (CISA)

 

Introduction of main downstream industries of hot rolled coil

Hot rolled coil is widely used in the manufacturing industries, such as cold-rolled substrate, ship, automobile, bridge, building, machinery, oil transmission pipeline and pressure vessel.

 

(1) Deep processing industry of hot rolled coil

Deep processing of hot rolled coil mainly involves the hot-rolled coil sheet with the thickness≤3.0mm, and is used for cold-rolled coil plate substrate, hot-rolled pickled plated and hot-rolled galvanized plate, etc.

 

Cold-rolled coil plate substrate is one of the main uses of hot rolled coil. The use of hot rolled coil after the cold rolling mainly includes the deep processed products, such as cold-rolled commodity coil and coated plate and electrical steel.

 

The demand of hot-rolled pickled coil mainly concentrates in automobile industry, compressor industry, mechanical manufacturing industry, parts and component processing industry, fan industry, motorcycle industry, steel household furniture, hardware, electric cabinet frame, and the stamping in various shapes.

 

The substrate of hot-rolled galvanized plate is hot rolled coil. Since cold rolling is omitted, it has the obvious cost advantage over the hot-dip galvanized plate, thus having strong market competitiveness, and capable of partly replacing the demand of hot-dip galvanized plate with thick specification.

 

(2) Structural steel

Structural steel is one of the main uses of hot rolled coil. The downstream industries include architectural steel structure, machinery industry, automobile, petroleum and natural gas.

 

In the architectural industry, hot-rolled structural steel is directly used for the fabrication of steel structure and frame, and hot rolled coil is also used in large amount as the substrate for the fabrication of cold-bent section steel and welding of steel pipe.

 

(3) Structural steel for hull

Hot rolled coil is also widely used as structural steel for hull, mainly for the manufacturing of the steel plates for the hulls and decks of the ships for marine, coastal and inland water transportation. Due to harsh working environment of the ships, the hull of the ship will be subject to the chemical corrosion of seawater, electrochemical corrosion, corrosion from marine life and microorganism; the hull will undertake large wind and wave impact and variable loads; the ship shape makes the machining method complex. So the hull structure raises strict requirements for steel.

 

(4) Steel for pressure vessel (boiler)

There are high requirements on steel for pressure vessel (boiler), mainly because the vessels will undertake different pressures and strengths. According to the work conditions and machining process of the vessel, the steel plate for the vessel shall have good cold bending and welding performance, good plasticity and ductility, and high-temperature short-time strength or long-term strength performance. Steel plates for pressure vessel are mainly used for the manufacturing of the vessels or other similar equipment in the petroleum, chemical, power station, boiler, gas separation and storage industries, such as various tower vessels, storage tank, ball tank, oil and gas tank, liquefied natural gas tank, liquefied petroleum gas cylinder and tanker; heat exchanger of boiler, reactor, boiler drum, heat exchanger, separator, high-pressure water pipe of power station, water turbine volute, superheater, main steam pipe and the heating surface of boiler fire chamber.

 

(5) Steel for bridge

In China, rapid development has taken place in bridge and railway, there is huge demand for steel in bridge and railway. Some hot rolled coils are used for the construction of bridge and railway.

 

(6) Weathering resistance, steel for corrosion-resistant structure

Continuous hot rolled steel strip resisting atmospheric corrosion, resisting sulfuric acid dew-point corrosion and seawater corrosion, the steel plate from horizontal cutting and the longitudinal cut steel strip, are used for the manufacturing of container, rolling inventory, oil derrick, seaport building, oil production platform and the structural components, such as the vessel containing the hydrogen sulfide corrosion medium in chemical and petroleum equipment.

 

(7) Steel for petroleum and natural gas transmission pipe

Steel for petroleum and natural gas transmission pipe is also one of the main use fields of hot rolled coil, particularly West-East Gas Pipeline Project motivated the growth of steel demand for pipeline.

 

(8) Structural steel for automobile

In the steel for automobile, the use of steel plates, including cold rolled plate and hot rolled plate, accounts for more than 50% of steel for automobile, in which hot rolled coil is widely used for freight car and passenger vehicle, mainly in the longitudinal beam and horizontal beam of the frame, horizontal beam of carriage and wheel of the lorry. High-strength hot-rolled plate is more and more widely used.

 

 

 

 

 

 

 

Analysis on the Import and Export of Steel Products in China

Analysis on the Import and Export of Steel in China

2005 was the line of demarcation for the import and export of steel in China. Before 2005, steel had the long-term net import trend in China. Since 2006, with rapid growth of steel output in China and improvement of product quality, the import of steel in China was converted into net export. In 2006, total steel import was 18.51 million ton, and total export was 43.01 million ton, realizing net export of 24.50 million ton. The export of China reached the peak in 2007, achieving the steel export of 62.69 million ton, accounting for 11.1% of national steel output in China. Afterwards, the steel export quantity and percentage in national output in China decreased, accounting for 5.3%-5.8% of national steel output in 2010-2013.

 

Import and export of steel in China in 2005-2013 (Unit: 10,000 tons)

Steel

2005

2006

2007

2008

2009

2010

2011

2012

2013

Import

2581.6

1851.0

1687.3

1538.7

1764.0

1642.9

1562.9

1362.1

1408

Export

2052.3

4300.7

6269.4

5918.3

2457.7

4244.7

4897.0

5560.2

6234

Net export

-529.4

2449.7

4582.1

4379.6

693.7

2601.8

3334.1

4198.1

4826

Domestic output

37117.0

46685.4

56460.8

58177.3

69243.7

79627.4

88131.3

95186.1

106762

Export percentage

5.5%

9.2%

11.1%

10.2%

3.5%

5.3%

5.6%

5.8%

5.8%

Source: General Administration of Customs

 

 

Import and export of steel in China in 2005-2013 (Unit: 10,000 tons)

Source: General Administration of Customs

 

 

Analysis on the Import and Export of Rebar and Wire Rod

The export of rebar in China reached the peak in 2007. The export quantity in 2007 was 5.908 million ton, accounting for 5.8% of the national rebar output. After 2008, due to the influence of the increase of provisional export tariff, the export competitiveness of rebar decreased and the export quantity obviously decreased. After 2009, the annual export quantity was maintained at 200-300 thousand ton, accounting only for 0.1%-0.2% of national output, and the output quantity in 2013 was 272 thousand ton, accounting only for 0.1% of national output. But after 2011, the export quantity of boracic alloy steel bar increased largely.

 

The export of wire rod in China reached the peak in 2006-2008, and the export quantity in 2006, 2007 and 2008 accounted for 7.8%, 7.8% and 6.3% of national output in the corresponding year respectively. After 2008, due to the influence of the increase of tariff on common wire rod, the export quantity of wire rod decreased, and the export quantity in 2009 accounted for only 1.1% of national output. Then the output quantity rose to certain extent, and the export quantity in 2013 was 8.005 million ton, accounting for 5.3% of national output.

 

Import and export of rebar in China in 2005-2013 (Unit: 10,000 tons)

Rebar

2005

2006

2007

2008

2009

2010

2011

2012

2013

Import

8.8

6.3

5.0

2.5

5.6

5.3

5.2

7.1

6.1

Export

174.4

373.9

590.8

116.8

30.5

22.5

22.4

26.2

27.2

Net export

165.6

367.6

585.8

114.3

24.9

17.2

17.2

19.2

21.1

Outpour

6776.5

8303.8

10136.6

9709.0

12150.6

13096.4

15405.6

17537.7

20619.2

Export percentage

2.6%

4.5%

5.8%

1.2%

0.3%

0.2%

0.1%

0.1%

0.1%

Source: National Bureau of Statistics of the People’s Republic of China, General Administration of Customs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Import and export of rebar in China in 2005-2013 (Unit: 10,000 tons)

Source: General Administration of Customs

 

Import and export of wire rod in China in 2005-2013 (Unit: 10,000 tons)

Wire rod

2005

2006

2007

2008

2009

2010

2011

2012

2013

Import

68.0

70.6

61.4

52.1

50.9

65.4

66.6

43.8

54.1

Export

320.4

555.4

623.9

505.6

108.2

234.9

300.8

559.6

800.5

Net export

252.4

484.9

562.5

453.5

57.3

169.4

234.2

515.8

746.4

Outpour

6051.1

7151.0

8038.2

8024.0

9585.7

10552.8

12259.1

13616.1

15089.3

Export percentage

5.3%

7.8%

7.8%

6.3%

1.1%

2.2%

2.5%

4.1%

5.3%

Source: National Bureau of Statistics of the People’s Republic of China, General Administration of Customs

 

Import and export of wire rod in China in 2005-2013 (Unit: 10,000 tons)

Source: General Administration of Customs

 

Import and Export of Hot Rolled Coil

Before 2005, hot rolled coil in China basically had the net import trend. Since 2006, with rapid growth of domestic production capacity, the output quantity of hot rolled coil in China increased significantly. Except in 2009 after the financial crisis, all years had net export. The output quantity in 2006-2008 was relatively high, and the output quantity in these three years accounted for more than 10% of total national output. After 2010, hot rolled coil export had certain recovery, but the export quantity accounted for low percentage in national output, basically at 3.3%-3.7% in 2011-2013.

 

Import and export of hot rolled coil in China in 2005-2013 (Unit: 10,000 tons)

Hot rolled coil

2005

2006

2007

2008

2009

2010

2011

2012

2013

Import

581.6

350.9

226.9

179.3

440.0

230.0

196.2

199.5

244.4

Export

404.0

855.5

1004.5

1054.9

376.8

881.9

526.3

618.1

662.9

Net export

-177.6

504.7

777.6

875.6

-63.3

651.8

330.1

418.6

418.5

Output

5192

6820

8652

9959

11994

14670

15714.0

16689.9

18270.7

Export percentage

7.8%

12.5%

11.6%

10.6%

3.1%

6.0%

3.3%

3.7%

3.6%

Source: General Administration of Customs

 

Import and export of hot rolled coil in China in 2005-2013 (Unit: 10,000 tons)

Source: General Administration of Customs

 

Development of Steel Trading and Logistics Industry in China

Before 2003, the demand of the steel market in China was in general balance and rapid growth, and the price fluctuation in the domestic steel market was significant. The steel trading enterprises had various profit-making modes, warranting the resources on behalf of the small and medium-sized traders by using the resources and the price advantage of the steel plant agent, obtaining the price difference through the market operation, and developing the end users by using the fund and brand advantage, thus capable of taking root in the steel market.

 

From 2003, the steel logistics financing in the commercial banks in China gradually emerged. The “steel plant-trader-bank” financing model largely lowered the fund threshold of steel trading enterprises, who strived to become steel plant agent or steel plant agreement party; with the financing modes of joint guarantee and mutual guarantee, the quantity of the steel trading enterprises was quickly enlarged, and the fund was enlarged. The intermediate demand in the domestic steel market quickly expanded.

 

In about 2008, the local governments generally took modern logistic park construction as the important project for business and investment invitation. Domestic real estate market saw explosive growth, and the steel trading enterprises were gradually “transformed”, investing the fund obtained through the financing for steel trading into the real estate projects. The financing-based demand in the domestic steel market increased largely. The steel financing-based demand objectively enlarged the demand in the domestic steel market, resulting in the deviation of the steel plant production from actual demand. The plant price was “inversely pegged” with the market in the long term, and inventory in the domestic steel market remained at the high level.

 

After 2009, the credit business of domestic commercial banks increased largely, and the commercial banks universally considered the steel logistics financing business with high importance, thus non-standard operations increased. On April 26th, 2012, General Office of China Banking Regulatory Commission issued Notice on guarding against the use of the bank loans from the steel trading enterprises through defrauding into high-risk industries, requiring the commercial banks to strengthen the approval of the loans to steel trading enterprises and the supervision on the loan flow. Thus financing demand in domestic steel market was curbed.

 

Factors Affecting Steel Price in Market

Main Factors Affecting Steel Price Change

2005-2013 Market Price Status of Rebar, Wire Rod, and Hot Rolled Coil

For the 2005-2013 domestic price change of rebar, wire rod, and the hot rolled coil in market, please see the following figure. Features of the price change in general are as follows:

 

Market price fluctuates drastically. In February 2006, main domestic market prices of 20mm level-3 rebar, 6.5mm ordinary line, and 5.75 mm*1,500 hot rolled coil were respectively: 3,103Yuan/ton, 3,017 Yuan/ton, and 3,045 Yuan/ton; to June 2008, the prices rose to respectively: 5,865 Yuan/ton, 5,978 Yuan/ton, and 5,973 Yuan/ton, which means respective rise of 2,762 Yuan/ton, 2,961 Yuan/ton, and 2,928 Yuan/ton, hitting increase of 89%, 98.1%, and 96.2%. After the break-out of international financial crisis, the steel price encountered panic steep fall. To October 2008, for minimum fall, the average prices of 20mm level-3 rebar, 6.5mm ordinary line, and 5.75 mm*1500 hot rolled coil respectively down to: 3,709 Yuan/ton, 3,446 Yuan/ton, and 3,068 Yuan/ton. Compared with highest prices in June, the rate of fall reached 36.8%, 42.4% and 48.6%.

 

Before the break-out of 2008 financial crisis, the market price of hot rolled coil was commonly higher than prices of rebar and wire rod, especially in former part of 2007 and March of 2005, domestic 5.75mm*1500 hot rolled coil average price hit 5,360 Yuan/ton, for which, compared with same period of Φ20mmHRB400 rebar andΦ6.5mm high line maximum average prices of 4,058 Yuan/ton and 3,912 Yuan/ton, it was respective 1,302 Yuan/ton and 1,448 Yuan/ton higher. After the financial crisis, being driven by investment demand, the construction steel material average price is higher than the average price of hot rolled coil.

 

Steel price fluctuation period is shorted and the range is reduced. After 2009, the steel market price fluctuation period and range reduced obviously. And sharp change is merely seen. The situation became more obvious in market after 2011. For the first three quarters of 2011 and the period from the end of November 2011 to May 2012, as well as May 2013 to December 2013, market price fluctuation range is only between 200 Yuan/ton. The main reason is that domestic steel industry gradually enters overall surplus phase, steel merchant lacks of fund, and market trading is not active. All these reasons limit the market price fluctuation range.

 

2005-2013 Shanghai market hot rolled coil and rebar price (Unit: Yuan/ton)

 

Shanghai Deformed Steel Bars-HRB400 Φ 16-25mm

Shanghai Hot Rolled Coils-Q235B 5.75mm*1500

 

                                             Source: SteelHome

 

Main Factors Affecting Steel Price of Domestic Market

Supply-demand relation of steel market decides tendency of price

Supply-demand relation decides pricing tendency. Before 2008, domestic hot rolled coil were of great demand so that the market price was once higher than the rebar and wire rod. With the rapid increase of domestic hot rolled coil output, the conflict of supply and demand is eased, and the market price difference with other types is gradually decreased. According to the data of Steel Home, average price of main domestic market in 2005 of 5.75mm*1500* hot rolled was 4081 Yuan/ton, for which, compared with price of level-3 20mm rebar that year, it was 573 Yuan/ton higher, and compared with price of wire rod price that year, it was 675 Yuan/ton higher. After that, the price difference has been gradually decreased. Especially, after the financial crisis of 2008, huge investment of our nation drives demand increase of rebar and wire rod. The average price of rebar has become higher than that of the hot rolled coil. In 2011, average price of rebar was 220 Yuan/ton higher than that for hot rolled coil. But with the ever intense situation of rebar output surplus, the price of rebar and the price of hot rolled coil get gradually close. And up to 2013, the average price of the whole year of hot rolled coil had become higher than the average price of rebar. Please see the following table.

 

2005-2013 Average prices and price difference of hot rolled coil and rebar, wire rod (Unit: Yuan/ton)

Year

5.75mm*1500

hot rolled coil

HRB400 rebar

HPB235 wire rod

Difference of hot rolled coil   and rebar

Difference between hot rolled coil and wire rod

2005

4081

3508

3406

573

675

2006

3719

3198

3225

521

494

2007

4149

3821

3746

328

403

2008

4949

4946

4872

3

77

2009

3661

3863

3678

-202

-17

2010

4292

4360

4266

-68

26

2011

4721

4941

4823

-220

-102

2012

4042

4070

4022

-28

20

2013

3734

3654

3607

80

127

Source: SteelHome

 

Upstream and downstream cost restricts the high point and low point

Cost decides the maximum and minimum values of price. And supply-demand relation decides price tendency, but cannot be extended without limit. To be simple, the cost of downstream industry decides upmost price of steel. When downstream industry cost cannot afford steel price rise and encounters deficit, the market price would turn from rising to falling. And the average production cost of steel industry decides lower limit of steel price. When steel factory meets deficit widely, potential for market price fall would not be large.

 

Domestic market fund supply decides steel price level

Fund decides steel price level. If the market fund is comparatively sufficient, it usually is accompanied with high price; but if the fund is tight, it usually is accompanied with low price. Taking period of 2011-2012 for instance, since the bank tightened up loan, steel merchants usually encountered tight fund, or some of them even had broken fund chain, especially for the 2012 break-out of steel trading credit crisis. It results in tight fund in industry which makes market price be kept in low level.

 

Analysis on domestic market competition situation

Impact of domestic market competition on market price is indispensable. Different structures of factories select different strategies, which decide different states of the market competition.

 

Taking rebar and hot rolled coil for instance: observing from the national market that, the rebar market is basically belong to complete competition state. No steel plant in domestic area could be called dominated factory. Only part of regional dominating factories exists. For example, Hebei Iron and Steel Group Co., Ltd. to Beijing, Tianjin and Hebei region, Shagang Group Co., Ltd. to Jiangsu and Zhejiang region, Shaoguan Iron and Steel Group and Guangzhou Iron & Steel Enterprises Group to Guangdong market, etc. Adjustment of steel plants more likely affects their respective dominating market, not other markets.

 

Hot rolled coil are different. Since its sales semi-diameter is comparatively large, and products concentration is high, besides the regional dominating steel factory price policy, steel merchants also care about large scale steel factory price policy adjustment. For example: Shagang Group Co., Ltd. and Rizhao Iron & Steel Group are regional dominating steel factories, and mainly take Eastern China as sales region. But merchants also care adjustment of price policies of Baosteel Group Corporation, Anshan Iron and Steel Group Corporation, Wuhan Iron and Steel (Group) Corp., as well as Hebei Iron and Steel Group Co., Ltd.. Especially Baosteel, though its hot rolled coil circulation volume at market is not large, its price policy adjustment still has obvious impact of guide on other factories and markets. However, with surplus output of the nation becomes more and more obvious, steel enterprises profits decrease sharply commonly or even become deficit. Long-distance transport disadvantage is becoming more and more serious. For example: if hot rolled coil of North China and northeast part of China need to be sold in east part of China, it would be at disadvantage on transport cost. Taking Shanghai market for instance: automobile transport or railway transport cost for North China region is commonly between 120-200 Yuan/ton, the cost for water transport of northeast part of China region is 120-150 Yuan/ton, but the cost for Eastern China region is only 50 Yuan/ton. Under the condition that common steel factories only win micro profits, the hot rolled coil factories are also shrinking their sales semi-diameter and taking strategy of regional sale as core, assisting with middle/long-distance sale in the expectation of getting good profits.

 

Market expectation’s function of promoting to price fluctuation

Market expectation has the function magnifying. It can promote price fluctuation range by changing supply-demand relation and market fund status. If market expectation to future price is rise, dealers would usually positively warrant and increase inventory, then the market fund would also be greatly increased; meanwhile, the increase of market inventory also drives rise of demand and stipulates market price to further rise up; vice versa.

 

Impact of financial market and bulk commodity market to steel price

Since the steel futures, iron ore futures, coke futures, and coking coal futures enter into market, domestic steel products are of more metal attribute. The steel industry chain is comparatively seriously affected by financial market and bulk commodity market fluctuation. Futures market and non-futures market are both contacted and competed, which increases uncertainty factors to steel market. Futures market has certain impact on non-futures market tendency. Non-futures market can better visually reflect the change of market tendency. Forward market shock and non-futures market compose mutually restricted balance. And meanwhile, it also becomes a key factor to be considered for steel factory pricing. Viewing from rebar futures and non-futures market price tendency, futures price and non-futures price have strong relativity. See the following figure.

 

2009-2013 rebar futures and non-futures prices comparison (Unit: Yuan/ton)

Future: rebar

Shanghai: rebar—HRB400 20mm (actual weight)

 

Source: SteelHome

 

Constitution of Cost of Steel

The cost of the steel consists of raw material cost, energy cost, labor cost, depreciation and finance cost, etc.

 

Constitution of Cost of Iron-making

The production cost of process of iron-making mainly consists of raw materials (pellet, iron ore, etc.), auxiliary materials (limestone, dolomite, refractory, etc.), fuel and power (coke, powdered coal, gas, oxygen, water, electricity, etc.), direct wages and benefits, manufacturing costs, cost deduction (gas recovery, water slag recycling, recycling of screen underflow of coke, etc.) According to the principle of the blast furnace smelting, producing 1 ton of pig iron needs 1.5 ton to 2.0 ton of iron ore, 0.4 ton to 0.6 ton of coke and 0.2 ton to 0.4 ton of flux.

 

The main factor that affects the total cost in the process of iron making is the cost of raw materials (iron ore, coke), and other expenses, including auxiliary materials, fuel, labor costs, which are only about 10% of the total costs after offsetting with the by-product recovery.

 

Production cost of pig iron = (1.6×iron ore+0.5×coke)/0.9

 

Constitution of Cost of Steelmaking

The production cost of steelmaking mainly consists of pig iron, scrap steel, alloy, electrode, refractory materials, auxiliary materials, electricity, maintenance and inspection, and other expenses. The main steel-making process is the converter steelmaking in our country, and the general configuration should be 10% to 15% of the scrap steel.

 

With the increase of power consumption, the addition of alloy and the increase of maintenance cost, with the exception of the cost of main raw materials, the other costs is about 18% of the total cost.

 

Manufacturing cost of a t of crude steel = (0.96×pig iron+0.15×scrap steel)/0.82

 

The Cost of Steel Rolling

The production cost of steel rolling process (hot rolling) is mainly composed of gas, electric energy, and roll loss and so on. The rolling of cost of different varieties is slightly different between 150 and 300 Yuan/ton.

 

Sample of Estimation of Steel Cost

For example, on August 26th, 2013, the price of raw materials in Hebei-66% iron fine power, 1,080 Yuan/ton; Grade II metallurgical coke, 1,330 Yuan/ton; steel scrap, 2,540 Yuan/ton:

 

Manufacturing cost of a t of pig iron = (1.6×1,080+0.5×1,330)/0.9=2,659 Yuan/t

Manufacturing cost of a t of crude steel = (0.96×2,659+0.15×2,540)/0.82=3,577 Yuan/t

Manufacturing cost of HRB400 rebar = 3,577+150+100=3,827 Yuan/ton (the cost of rebar rolling is about 150 Yuan, and the cost of alloy is about 100 Yuan)

Manufacturing cost of HPB300 high speed wire rod = 3,577+150+70=3,797 Yuan/ton (the cost of high speed wire rod rolling is about 150 Yuan/ton, and the cost of alloy is about 70 Yuan/ton)

Manufacturing cost of Q235 traditional continuous hot rolled coil = 3,577+300=3,877 Yuan/ton (the cost of rolling of traditional continuous hot rolled coil is about 300 Yuan, and the sheet bar continuous casting and rolling cost is lower about 100 Yuan/ton)

Futures Standard Contract of Rebar, Wire rod and Hot Rolled Coil

Futures Standard Contract of Rebar in Shanghai Futures Exchange

The text of contract

Trading products

Rebar

Trading unit

10 tons / lot

Price quotation

Yuan (RMB) per ton

Minimum price fluctuation

1 Yuan/ton

Maximum daily price fluctuation

No more than ±3% of the settlement price on the previous trading day

Contract delivery months

From January to December

Trading hours

From 9:00 to 11:30 in the morning, from 1:30 to 3:00 in the afternoon

Last trading day

On the 15th day of the contract delivery months (it will postponed in the case of legal holidays)

Delivery period

Five consecutive days after the end of the transaction

Grade of delivery

Standard:Φ16mm,Φ18mm,Φ20mm,Φ22mm and Φ25mm rebar marked with HRB400 or HRBF400 in line with the national standard GB1499.2-2007 Steel for the Reinforcement of Concrete-Part 2: Hot Rolled Ribbed Bars

Substitute:Φ16mm,Φ18mm,Φ20mm,Φ22mm and Φ25mm rebar marked with HRB335 or HRBF335 in line with the national standard GB1499.2-2007 Steel for the Reinforcement of Concrete-Part 2: Hot Rolled Ribbed Bars.

Delivery venue

Delivery warehouse designated by the Exchange

Minimum trading margin

5% of contract value

The smallest Unit of delivery

300 t

Settlement type

Physical delivery

Product symbol

RB

Listed exchange

Shanghai Futures Exchange

 

Contract Appendix

I. Delivery Unit

The trading Unit of rebar futures standard contract is 10 t/ lot, and the delivery Unit is 300 ton /warrant. The delivery shall be according to the integer multiples of each warrant.

 

II. Quality requirements

(1)   The quality of rebar for physical delivery shall conform to the relevant regulations of HRB400, HRBF400, HRB335 and HRBF335 of the national standard GB1499.2-2007 Steel for the reinforcement of concrete-Part 2: Hot rolled ribbed bars.

 

(2)   The dimensions, shape, weight and tolerances, packing, marking and quality certificate of delivery rebar shall conform to the regulations of the national standard GB1499.2-2007 Steel for the reinforcement of concrete-Part 2: Hot rolled ribbed bars.

 

(3)   The length of rebar for physical delivery is 9 meters and 12 meters cut-length.

 

(4)   The rebar of each standard warrant shall consist of goods produced by the same manufacturer, have the same brand, the same registered trademark, the same nominal diameter and the same length. And the production date of rebar in each warrant shall not be more than 10 consecutive days[1], and the earliest date shall be the production date of this warrant.

 

(5)   The rebar of each warrant should be the registered brand approved by the Exchange, and accompanied by the corresponding quality certificate.

 

(6)   The delivery of rebar shall be measured with the actual weight. The goods of each warrant shall not exceed 3% more or less, and the pounds difference shall be no more than ± 0.3%.

 

(7)   The warehouse warrant shall be issued by the designated delivery warehouse upon the acceptance of according to regulations.

 

III. Production companies and registered brands approved by the Exchange

The rebar for physical delivery should be the brands registered in the Exchange. The specific registered brand and premium and discount standard shall be separately prescribed and announced by the Exchange.

 

IV. Designated delivery warehouse

The delivery warehouse shall be separately designated and announced by the Exchange. The premium and discount standard of remote delivery warehouse shall be designated and announced by the Exchange.

 

Futures Standard Contract of Wire Rod in Shanghai Futures Exchange

 The Text of Contract

Trading products

Wire rod

Trading unit

10 tons / lot

Price quotation

Yuan (RMB)/ ton

Minimum price fluctuation

1 Yuan/ton

Maximum daily price fluctuation

No more than ±5% of the settlement price on the previous trading day

Delivery months

From January to December

Trading hours

From 9:00 to 11:30 in the morning, from 1:30 to 3:00 in the afternoon

Last trading day

On the 15th day of the contract delivery months (it will postponed in the case of legal holidays)

Delivery period

Five consecutive days after the end of the transaction

Grade of delivery

StandardΦ8mm wire rod marked with HPB235 in line with the national standard GB1499.1-2008 Steel for the Reinforcement of Concrete-Part 1: Hot Rolled Plain Bars

Substitute: Φ6.5mm wire marked with HPB235 in line with the national standard GB1499.1-2008 Steel for the Reinforcement of Concrete-Part 1: Hot Rolled Plain Bars

Delivery venue

Delivery warehouse designated by the Exchange

Minimum trading margin

7% of the contract value

Transaction fees

No more than two-ten thousandth of a turnover (including the risk reserve)

The smallest Unit of delivery

300 t

Settlement type

Physical delivery

Product symbol

WR

Listed exchange

Shanghai Futures Exchange

 

Contract Appendix

I. Delivery unit

The trading Unit of wire rod futures standard contract is 10 t/ lot, and the delivery Unit is 300 t /warrant. The delivery shall be according to the integer multiples of each warrant.

 

II. Quality requirements

(1)   The quality of wire rod for physical delivery shall conform to the relevant regulations of HPB235 in the national standard GB1499.1-2008 Steel for the Reinforcement of Concrete-Part 1: Hot Rolled Plain Bars.

 

(2)   The dimensions, shape, weight and tolerances, packing, marking and quality certificate of delivery wire rod shall conform to the regulations of the national standard GB1499.1-2008 Steel for the Reinforcement of Concrete-Part 1: Hot Rolled Plain Bars.

 

(3)   The wire rod of each standard warrant shall consist of goods produced by the same manufacturer, and have the same brand, the same registered trademark, the same nominal diameter and the same length. And the production date of wire in each warrant shall not be more than 2 consecutive days, and the earliest date shall be the production date of this warrant.

 

(4)   The wire rod of each warrant should be the registered brand approved by the Exchange, and accompanied by the corresponding quality certificate.

 

(5)   The delivery of wire shall be measured with the actual weight. The goods of each warrant shall not exceed 3% more or less, and the pounds difference shall be no more than ± 0.3%.

 

(6)   The warehouse warrant shall be issued by the designated delivery warehouse upon the acceptance of according to regulations.

 

III. Production companies and registered brands approved by the Exchange

The wire rod for physical delivery should be the brands registered in the Exchange. The specific registered brand and premium and discount standard shall be separately prescribed and announced by the Exchange.

 

IV. Designated delivery warehouse

The delivery warehouse shall be separately designated and announced by the Exchange. The premium and discount standard of remote delivery warehouse shall be designated and announced by the Exchange.

 

Futures Standard Contract of Hot Rolled Coil in Shanghai Futures Exchange

The Text of Contract

Trading products

Hot rolled coil

Trading unit

10 tons / lot

Price quotation

Yuan (RMB)/ ton

Minimum price fluctuation

2 Yuan/ton

Maximum daily price fluctuation

No more than ±3% of the settlement price on the previous trading day

Delivery months

From January to December

Trading hours

From 9:00 to 11:30 in the morning, from 1:30 to 3:00 in the afternoon, and other times provided by the Exchange.

Last trading day

On the 15th day of the contract delivery months (it will postponed in the case of legal holidays)

Delivery period

Five consecutive days after the end of the transaction

Grade of delivery

Standard: the hot rolled coil shall conform to Q235B of the national standard GB/T3274-2007 Hot Rolled Plates and Strips of Carbon Structural Steels and High Strength Low-alloy Structural Steel or SS400 of JIS G 3101-2010 Rolled Steel for General Structure with the thickness of 5.75mm and width of 1,500mm.

Substitute: the hot rolled coil shall conform to Q235B of the national standard GB/T3274-2007 Hot Rolled Plates and Strips of Carbon Structural Steels and High Strength Low-alloy Structural Steel, or SS400 of JIS G 3101-2010 Rolled Steel for General Structure with the thickness of 9.75mm, 9.5mm, 7.75mm, 7.5mm, 5.80mm, 5.70mm, 5.60mm, 5.50mm, 5.25mm, 4.75mm, 4.50mm, 4.25mm, 3.75mm, 3.50mm and width of 1,500mm.

Delivery venue

Delivery warehouse designated by the Exchange

Minimum trading margin

4% of the contract value

Settlement type

Physical delivery

Product symbol

HC

Listed exchange

Shanghai Futures Exchange

 

Contract Appendix

I. Delivery unit

The trading Unit of hot rolled coil futures standard contract is 10 t/ lot, and the delivery Unit is 300 ton /warrant. The delivery shall be according to the integer multiples of each warrant.

 

II. Quality requirements

(1) The quality of hot rolled coil for physical delivery shall be stipulated as in the following:

 

1.      Standard

The hot-rolled coil shall conform to Q235B of the national standard GB/T3274-2007 Hot Rolled Plates and Strips of Carbon Structural Steels and High Strength Low-alloy Structural Steel, or SS400 of JIS G 3101-2010 Rolled Steel for General Structure with the thickness of 5.75mm and width of 1,500mm.

 

2.      Substitute

The hot rolled coil shall conform to Q235B of the national standard GB/T3274-2007 Hot Rolled Plates and Strips of Carbon Structural Steels and High Strength Low-alloy Structural Steel, or SS400 of JIS G 3101-2010 Rolled Steel for General Structure with the thickness of 9.75mm, 9.5mm, 7.75mm, 7.5mm, 5.80mm, 5.70mm, 5.60mm, 5.50mm, 5.25mm, 4.75mm, 4.50mm, 4.25mm, 3.75mm, 3.50mm and width of 1,500mm.

 

(2) Other requirements separately designated and announced by the Shanghai Futures Exchange for Delivery Details of Shang Futures Exchange.

 

III. Production companies and registered brands approved by the Exchange

The hot rolled coil for physical delivery should be the brands registered in the Exchange. The specific registered brand shall be separately prescribed and announced by the Exchange.

 

IV. Designated delivery warehouse

The delivery warehouse shall be separately designated and announced by the Exchange.

 

V. Additional explanation

This standard contract shall be interpreted by the Shanghai Futures Exchange.

 

 

 

 

 

 

 

 

Futures Guidelines and Related Regulations for Rebar, Wire Rod, and Hot Rolled Coil

Entry Trading Flow Chart

Client Entry Trading Flow Chart

 

 

 

 

 

Trading and Clearing Flow Chart

 

 

 

 

 

 

Key Regulations for Trading Risk Control

 

 

 

 

Physical Delivery Flow Chart

1.      Standard Warrant Generation

Standard Warrant Generation Flow Chart

 

 

 

 

2.      Delivery Flow

Delivery Flow Chart

 

3.     

Application for Pickup of Delivery

Standard Warrant Stock-out Application shall be made to designated delivery warehouse. Designated delivery warehouse shall deliver after review.

 

 

Pickup of Delivery

 

 

 
 

 

 

Pickup Shipment

Warrant owner shall indicate the way of pickup in stock-out application:

1. Independent pickup: Designated delivery warehouse shall make shipment after Standard Warrant is verified correctly.

2. Third party pickup: Owner shall submit a letter of authorization, and indicate entrusted pickup entity, pickup password, contact person, telephone and other contact information on Stock-out Application. Designated delivery warehouse shall make shipment after Standard Warrant is verified correctly.

3. Designated delivery warehouse commissioned for shipment shipped, Owner shall submit a letter of authorization, and indicate shipment address, contact person, telephone and other contact information on Stock-out Application. Designated delivery warehouse shall make shipment after Standard Warrant is verified correctly.

Owner and entrusted entity shall supervise for shipment. Otherwise, this shall be deemed as designated delivery warehouse makes shipments correctly.

 

 

  

 

 

 

 

 

 

 

 

 

 

 

         
   
 
 

Handling of quality dispute

If Buyer opposes to quality of delivery of goods and quantity (delivery goods shall be placed in designated delivery warehouse), it shall submit a written application to the Exchange (including submission day, extended to the first working day after legal holidays) before the 15th day of the month following Physical Delivery Month. Buyer shall also provide quality verification conclusion issued by quality supervision and inspection agency designated by the Exchange (list of quality supervision and inspection agencies will be announced by the Exchange).

Validity period of each batch of steel goods for delivery shall cover the last delivery day of the current delivery. Even if delivery deadline for each batch of steel goods for delivery is earlier than deadline for the submission of quality objections, if quality verification conclusion for this batch of steel goods is that they are substandard goods, Seller shall still bear full responsibility for the actual quality of such batch of goods.

 

 

 
 
   
 
   

Fill in Stock-out Confirmation Sheet

When delivery warehouse makes shipments, it shall promptly fill in Standard Warrant Stock-out Confirmation Sheet, and stamp special seal of delivery vs. payment on the received corresponding standard warrant, keep and file copies together with warehouse for safekeeping and future reference.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warehouse Warrant Stock-out Flow Chart

EFP Flow Chart

 

Notes:

1. Application period for handling EFP: from the day of EFP contract listing to last two trading days before delivery month (including trading day).

2. EFP is applicable for historical positions rather than newly-opened positions on application day.

3. EFP delivery and settlement price: negotiated price agreed by Buyer and Seller Member (Client).

 

 

Hedging Flow Chart

* When hedging positions are approved, positions shall be established prior to the closing of the third trading day before the last trading day of the contract involved with such hedging.

* Hedging trading positions shall not be reused since the first trading day of the delivery month.

* When hedging in nearby month is not approved, Min (Hedging positions in general month and speculative position limit quota).

 

Business Rules and Relevant Regulations of Shanghai Futures Exchange

Highlights of Trading Rules

(1) Trading seat is a channel used by member to input trading instructions into computer trading system of the Exchange to participate in centralized auction trading. Trading seat falls into floor trading seat and remote trading seat.

 

After obtaining membership of the Exchange, member shall have a floor trading seat.

 

Remote trading seat refers to a trading mode that member takes advantage of electronic communication system networked with computer trading system of the Exchange at business premise to directly input trading instructions and participate in centralized auction trading in the Exchange.

 

The rights and obligations of remote trading seat shall be the same as those of floor trading seat.

 

(2) Trading instruction falls into limit price instruction, cancellation instruction and other instructions prescribed by the Exchange. The maximum quantity of limit price instruction shall be 500 lots every time. For trading instruction, the minimum quantity of order should be 1 lot, and quotation shall be within the price fluctuation limits. Other instructions include two new types of trading instructions, i.e., Fill or Kill (FOK) and Fill and Kill (FAK).

 

(3) The Exchange shall implement trading ID filing system. Trading ID refers to specific code dedicated to futures trading between member and client, which falls into Non-FF member ID and client ID.

 

(4) The Exchange shall provide member, client and social public with futures trading information on instant, daily, weekly, monthly and yearly basis. Such information shall cover commodity name, delivery month, latest price, price change, volume, positions, change in positions, price of application for buying, price of application for selling, quantity of application for buying, quantity of application for selling, trading volume of every deal, settlement price, opening price, closing price, the highest price, the lowest price, pre-settlement price and so on.

 

All members, information management agencies, public media and individuals shall be not allowed to publish false or misleading information.

 

Highlights of Detailed Rules for Settlement

Settlement refers to business activity of calculating and allocating member’s trading margin, profit and loss, fee, delivery payment and other related funds in accordance with trading results and relevant provisions of the Exchange.

 

(1) Routine settlement

1. The Exchange shall a dedicated settlement account in futures margin depository bank for depositing Member’s margin and related funds. Member must open dedicated fund account in the futures margin depository bank for depositing margin and related funds. The Exchange shall implement management of differential accounts for margin deposited by Member into dedicated account of the Exchange.

 

2. The Exchange shall implement settlement system of Daily Mark-to-Market. In other words, after closing of daily trading, the Exchange shall settle profit and loss, trading margin of all contracts, commission, taxes and other expenses according to intraday settlement price, make one-off transfer of accounts payable and accounts receivables by net amount, and correspondingly increase or decrease settlement reserve for member.

 

3. Adding margin: After closing of daily trading, if settlement reserve after the settlement is less than the minimum balance, Member is required to make additional funding before AM 8:30 on the next trading day. If Member fails to do so and settlement reserve balance is greater than zero and below the minimum balance of settlement reserve, member shall be prohibited to open new positions. If the settlement reserve is less than zero, the Exchange will launch “Mandatory Liquidation” in accordance with the relevant provisions.

 

(2) Marketable securities

With approval of the Exchange, member can offset the margin with marketable securities, but the loss, expense, tax and other payments shall be settled with monetary funds. Client shall deposit securities under the entrustment of FF member.

 

When FF member offsets the margin with marketable securities for client, it shall present Client’s Special Letter of Entrustment affixed with Client’s signature. If Client’s standard warrant is used to offset margin, client shall authorize member in standard warrant management system and submit such authorization to the Exchange.

 

The business of offsetting margin with marketable securities shall be handled by clearing institution of the Exchanges, the deadline for handling this business is closing of daily trading every day. Under special circumstances, the Exchange can postpone the handling deadline.

 

1. The types of marketable securities:

Standard Warrant: Paper standard warrant shall not be used to offset the margin. Member or client shall undergo the formalities of recovering paper standard warrant back to an electronic form before offsetting margin;

 

Other marketable securities identified by the Exchange

 

2. Formalities of offsetting margin with marketable securities

Application

For the business of offsetting margin with marketable securities, member shall apply to the Exchange. When member offsets margin with marketable securities, it shall also submit Client’s Special Letter of Entrustment affixed with client’s signature. If client’s standard warrant is used to offset margin, client shall authorize member in standard warrant management system and submit such authorization to the Exchange.

 

Verification and deposit

With approval of the Exchange for application, member, who offsets the margin with standard warrant, shall submit standard warrant in electronic form to the Exchange via standard warrant management system. The Exchange shall handle deposit procedures (Please refer to Standard Warrant Management Measures of Shanghai Futures Exchange for the specific operational methods).

 

Verification and deposit of other marketable securities shall comply with the regulations of the Exchange.

 

3. Calculation methods of securities

Where standard warrant is used to offset the margin, its market value shall be calculated on the basis of the intraday settlement price of futures contract by product in latest delivery month (as benchmark price), and the amount for offsetting the margin shall be at most 80% of market value of standard warrant. The amount for offsetting the margin, resulting from discounted market value of marketable securities, is referred to as “discount amount”.

 

Benchmark price for other marketable securities to offset the margin shall be specified by the Exchange.

 

In daily settlement of the Exchange, the above methods shall be adopted to re-fix benchmark price of marketable securities and adjust discount amount.

 

Highlights of Risk Control Management Measures

(1) Margin system

 

1. Implementation of trading margin system in the Exchange

Trading margin refers to member’s funds of its account in the Exchange for fulfilling the contract, which is occupied by contract. Minimum trading margin of rebar futures contract, wire rod futures contract and hot rolled coil futures contract shall be 5%, 7% and 4% of contract value, respectively.

 

2. Margins for different quantity of positions in the futures contract and different stages of listing operation

According to different quantity of positions in a certain futures contract of rebar and wire rod and different stages of listing operation (from quotation day of such a new contract to the last trading day), the Exchange shall develop different fee scales for trading margin.

 

Fee scale of trading margin for hot rolled coil shall not be adjusted in echo with changes in quantity of positions of a certain futures contract (i.e., when quantity of positions changes, fee scale for trading margin shall remain unchanged). The Exchange shall develop different fee scale of trading margin according to the different stages of listing operation for Hot-rolled Coil futures.

Specific provisions are formulated as follows:

 

Fee scale for trading margin under changes in quantity of positions of rebar futures contract

Since the first trading day of the last third month before delivery month, when total open interest (X) meets the following criteria

Percentage of trading margin for rebar

X≤1.2 million

5%

1.2 millionX≤1.35 million

7%

1.35 millionX≤1.5 million

9%

X1.5 million

11%

Note: X represents the total dual-sided position of contract in a certain month (Unit: lots).

 

Fee scale for trading margin under changes in quantity of positions of wire rod futures contract

Since the first trading day of the last third month before delivery month, when total open interest (X) meets the following criteria

Percentage of trading margin for wire rod

X≤450,000

7%

450,000X≤600,000

8%

600,000X≤750,000

10%

X750,000

12%

Note: X represents the total dual-sided position of contract in a certain month (Unit: lots).

 

文本框: Trading margin proportion%

Total open interest of rebar (10,000 lots)

 

文本框: Trading margin proportion%

Total open interest of wire rod (10,000 lots)

 

In the trading process, when positions of a certain futures contract reaches total open interest, fee scale for trading margin shall be temporarily not adjusted. At the time of intraday settlement, when positions of a certain futures contract reaches total open interest, the Exchange shall charge trading margin corresponding to total open interest positions according to all positions of such a contract. In case of in adequate margin, the gap arising therefrom shall be filled before the opening of the next trading day.

 

The Exchange shall adjust trading margin methods according to different stages of listing operation of futures contracts (near the settlement period).

 

 

 

Fee scale for trading margin at different stages of listing operation of rebar futures contract

Trading phase

Proportion of rebar trading margin

Contract listing

5%

As of the first trading day of the first month prior to the delivery month

10%

As of the first trading day of the delivery month

15%

As of the second trading day prior to the last trading day

20%

 

Fee scale for trading margin at different stages of listing operation of wire rod futures contract

Trading phase

Proportion of wire rod trading margin

Contract listing

7%

As of the first trading day of the first month prior to the delivery month

10%

As of the first trading day of the delivery month

15%

As of the second trading day prior to the last trading day

20%

 

Fee scale for trading margin at different stages of listing operation of hot rolled coil futures contract

Trading phase

Proportion of wire rod trading margin

Contract listing

4%

As of the first trading day of the first month prior to the delivery month

10%