China's domestic HDG prices have continued to climb up during the last two weeks. For example, the price of SGCC 1.0 mm x 1,250 mm x C material produced by local steelmaker Angang has risen to RMB 4,380/mt, up from RMB 4,280/mt on May 21.
These past two weeks domestic spot HDG prices in China have continued to jump up even though fluctuating movements have been observed in the prices of HR, CR, rebar and wire rod over the same period. This rising trend is mainly due to shrinking inventories and the optimism seen among traders despite the lack of any significant improvment in the transaction situation. In addition, the rumors in the market that VAT is about to be increased again following the previous adjustment on April 1 have also boosted the upward momentum in the market.
However, HDG traders are also wondering when the current increase trend will end. Looking at the current situation, the lack of strength of demand and the downward direction of HR, CR, rebar and wire rod prices coming up to the end of this week could point to the imminent end of the upward movement of HDG prices. Besides, the export market has failed to show an improvement. On the other hand, a downward trend would not be facilitated by the declining inventory levels. In this context, China's HDG prices may start to show relatively stable movement in the coming period.
As for domestic mills, WISCO this week issued its ex-works prices for July, with its HDG prices increasing by RMB 330/mt ($48/mt) compared to June levels. As a result, the producer's new price of 1.0 mm DX51D material stands at RMB 4,623/mt ($678/mt), which is higher than the present spot price. The mills still appear to be optimistic about the market and are seeking to push up the spot market prices.
Based on the situation observed this week, the upward movement in China's domestic HDG market may soon be replaced by a more stable trend. Also, as the domestic HR and CR markets have begun to decrease, China's HDG market may follow the same trend with a slight delay.