OREANDA-NEWS. July 10, 2015. It’s rare that commodity markets are as strange as the topsy-turvy world encountered by Alice in Lewis Carroll’s novel Through the Looking Glass. But in the last few days prices in China have been behaving very strangely indeed. In Carroll’s book a Walrus famously declares to his companion the Carpenter that the time has come for them to “talk of many things: Of shoes, and ships, and sealing-wax, of cabbages and kings, and why the sea is boiling hot, and whether pigs have wings.”

It’s not the shoes and sealing-wax that people have been talking about recently in China, but rather the price of cabbages — and steel.

According to data published by the Chinese Ministry of Commerce (MOFCOM) on its website Tuesday, the average price of a ton of Chinese cabbage in wholesale markets in Shanghai is now cheaper than a ton of hot rolled coil, which is the flat steel product used in everything from construction to white goods and automobiles.

MOFCOM reported that the average wholesale price of round white cabbages in Shanghai was Yuan 2.07/kg Tuesday, equivalent to Yuan 2,067/metric ton (\\$333/mt). On the same day, Platts assessed the mid-point of Q235 hot rolled coil 5.5mm thick in Shanghai at Yuan 1,985/mt ex-stock with 17% VAT, down Yuan 105/mt from the day before. This made wholesale cabbage Yuan 82/mt cheaper than HRC sold by traders in the city.

The retail price of cabbage has been higher than steel for some time. The price monitoring center of the National Development & Reform Commission, which publishes prices on a monthly basis, reported that  the average retail price of cabbage in 36 Chinese cities at the start of June was Yuan 1.69 per Jin, a traditional Chinese unit of weight equivalent to 500g. This means that, on a per-ton basis, the average retail price of cabbage was Yuan 3,380 last month.

The chart below shows the average wholesale price of Chinese cabbage across the country compared with the Platts Shanghai HRC assessment. Though cabbage prices have risen by 32% since the beginning of the year, they were only 4% higher over the same period in July last year. The price of HRC, on the other hand, has fallen by 41% year on year with weak domestic demand and excess supply due to overcapacity resulting in steel trading at all-time lows.

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Despite the prices of the two commodities converging, selling steel remains more lucrative than selling cabbages. As one Shanghai-based steel trader explained to Platts: “You can’t sell vegetables in the same volume as steel.” However, another steel trader disagreed, saying that with the market in such dire straits, he would be better off going home to “plow the fields” rather than try to make money in the steel markets.

At the end of Alice’s adventures through the looking glass, Alice wakes to find it was all just a wondrous dream. If only China’s steel industry participants were so lucky…