Münster’s Review

Traditionally, in the flange world, September is the month when wholesalers place their stock orders for deliveries at the beginning of the year. There has been a postponement to October / November this year, mainly due to the concern du purchase over-priced.

This concern has been compounded by rumors in the market that prices will drop significantly at the beginning of the year.

News on flanges

Raw material  prices for P250GH in China started at 5,150 RMB / tonne in October 2018, and it was this price that remained stable throughout the month. This means that for exactly two months exactly one price has settled.  Without any fluctuations.

Nevertheless, some manufacturers have lowered prices by about 3.5% for some days now.

How is that possible?

may you ask yourself. The explanation is very simple and somehow “Chinese”. The Chinese government has increased the export tax rebate, which is a tax refund for exporters from 9% to 13%, which equates to an additional 4% yield.

A few manufacturers pass this financial advantage on to us, which we then gladly pass on to you.

However, this financial benefit has nothing to do with normal price developments. In our estimation, after a few weeks, prices will settle at a level of about minus 2%.

Situation in China

The tax refund for exporters is undoubtedly classified as a protectionist measure by the government to mitigate the impact of US punitive tariffs on the affected industries.

Whether steel companies actually need this support can be doubted. In fact, in the first three quarters of 2018, the Chinese steel industry, which in recent years has mutated from the state’s former favorite child to a spurned stepchild, has experienced a boom that has not happened for years. The 6% increase in China’s gross domestic product is due, among other things, to increased domestic demand in the engineering, construction and automotive sectors.

Even though some of the increase in gross domestic product in this amount is doubted, our experience in the first three quarters is exactly the same as the impact. It has become increasingly difficult to place orders at acceptable prices and delivery times. In fact, it was obvious that some manufacturers were not interested in new orders because they had enough orders.

Forecast or: my view into the crystal ball

In our estimation, there will be no further price reductions – except for the current slight reduction. This is due to several circumstances.

  1. Currently a large number of orders are placed on the Chinese market …. Offer / Demand ….;)
  2. All orders not placed now, but in December, will definitely fall into the Chinese New Year, which in turn leads to longer delivery times and higher prices.
  3. After the Chinese New Year, there are likely to be personal problems. As every year, many workers will not return to their jobs. This in turn makes the production situation more difficult. And that certainly does not lead to price cuts.

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So we do not share the market rumors about extreme price reductions in the flanges world.

With connecting regards

Claudia Münster