China's domestic HDG prices have registered an increasing movement again during the past week. For example, the price of SGCC 1.0 mm x 1,250 mm x C material produced by local steelmaker Angang has increased to RMB 4,850/mt, up from RMB 4,700/mt last Thursday.
With Chinese steel giant Baosteel this week raising its HDG prices dramatically, domestic spot prices for HDG have been pushed up again. However, the traditional low season for the steel sector in China has arrived and so the current transaction situation is not good. As a result, purchasers are now maintaining a wait-and-see attitude towards the latest price rise and are cautious as regards purchases. As for traders, most of them are showing caution in terms of their inventory levels as prices have risen to a relatively high range and as a recovery of demand appears to be slow in coming. Meanwhile, the annual iron ore contract talks are still continuing. Indeed, some players believe the sharp hike in Baosteel's latest ex-work prices is aimed at preparing the way for the new iron ore price which is likely to be higher than the CISA's targeted price. Anyway, Baosteel's price hike has had a great impact on the market, while the relatively high production cost will also help support the rising trend of market prices.
As for domestic mills, Baosteel this week issued its HDG ex-works prices for August, raising prices by RMB 500/mt ($73/mt) compared to its ex-works price for July. As a result, the price of 1.0 mm DC51D+Z stands at RMB 4,777/mt ($699/mt), excluding 17 percent VAT. In addition, Tangshan Hentong raised its ex-works prices by RMB 100/mt ($14/mt) for HDG of thickness less than 0.35 mm. If the Chinese side fails to obtain its desired result from the iron ore talks, more mills will raise their prices citing high costs.
Based on the situation observed this week, China's domestic HDG prices may maintain their increasing movement next week also. With production costs proving higher than previous expectations, the mills may want to transfer the extra cost to the buyers. As a result, spot prices may continue to be pushed up until such time as they are no longer supported by demand.