Exports preferred on lower domestic prices for flats

SteelOrbis Shanghai Hot rolled and cold rolled product prices in local Chinese markets started going down after seeing a rapid increase, while export prices are also getting milder. Both steelmakers' ex-factory prices and the production costs are on the rise. Furthermore, there will not be plenty of supplies in March and even in April as the mills have already filled their order books. Therefore traders are not willing to sell their products at lower price levels. But consumers do not accept the high levels, causing to the stalemate in the market. Meanwhile, the market inventories are at high levels especially for hot rolled products. Chinese exports prices have also started losing some ground in the last few days. Last week hot rolled coil export offers increased around RMB 10-20/mt weekly to $450-460/mt CFR levels for Southeast Asia. Both high domestic prices and the lack of offers from the CIS countries supported Chinese traders' price hike. Nevertheless South East Asian customers can generally accept $435-440/mt CFR. As the domestic prices have started to decrease and export offers from the CIS countries have started to increase, many traders faced difficulties in exporting their products. However the demand in international markets is still strong. The decreasing domestic prices convinced traders to accept lower export price levels. A certain trader reports that Baotou Steel's offers of middle and thick hot rolled coils for May shipments to Vietnam are at $435/mt CFR, equal to the level of RMB 3'600/mt ($448) in Chinese domestic market. On cold rolled side, some traders are importing products due to short supply in local markets. Last week, a certain trader indicated that they were importing Russian origin thin cold rolled coil at $505/mt CFR. Chinese hot rolled and cold rolled product prices may go down further due to high inventory in the short-term. However, the higher production cost and limited supplies will inevitably call for a rebound after later.