China's domestic HDG prices have climbed up during the past week, as forecasted in our last report. For example, the price of SGCC 1.0 mm x 1,250 mm x C material produced by local steelmaker Angang has jumped to RMB 4100/mt, up from RMB 4,000/mt on Thursday last week.
Following the three-day holiday at the start of May China's HDG spot prices have registered an obvious increase helped by reduced inventory levels. However, compared with HR, CR, rebar and wire rod, the increase margin has been relatively small for HDG. Still, traders are happy with the increase that has also been seen in the transaction volume and so have become more confident about raising their prices. There has been a strengthening of global demand, most likely due to the warmer weather and the recent initiation of a recovery of global prices. For example, in the flat steel markets in Turkey, India and Saudi Arabia, signs of an improvement have been seen during these past two weeks. This could either mean that global steel prices have touched bottom or that they are currently just experiencing a fluctuating movement; however, most Chinese traders opt for the latter scenario. Only a small fraction of traders believe that the economy has begun to register a genuine recovery.
With regard to the export situation, 1.0 mm thick HDG with 100g/m2 Zn coating is still offered at $530/mt FOB CMP, the same level as last week, while 0.5 mm thick HDG is still at $590/mt FOB CMP. Exporters report that there are more enquiries now than before. However, compared with traders, mills still can provide lower offer prices with shorter delivery times.
As for domestic mills, WISCO today, May 7, issued its ex-work prices for June, with its cold rolled product prices increasing by RMB 50/mt ($7/mt) compared to May levels. Indeed, more mills are likely to raise their cold rolled product ex-works prices in the wake of this increase.
Based on the situation observed this week, the upward movement in China's domestic HDG market may continue into next week due to the current low levels of inventories. Nevertheless, in the longer term, the current rising trend would appear only to be a temporary fluctuation in a market which remains sluggish overall. Domestic spot prices appear unlikely to maintain their current trend given the economic environment. As a result, domestic prices are likely to fall again in the next few weeks. A close eye will need to be kept on the inventory situation in the coming period.