China's domestic HDG prices continued to drop slightly 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 declined to RMB 4,000/mt, down from RMB 4,050/mt on Thursday last week.
Due to high inventories and low demand, HDG spot prices in China have continued to decline even though the weather has been getting warmer. Traders are short of confidence as the present transaction situation is still not great. Most purchasers are maintaining a wait-and-see attitude and remain cautious as regards purchasing activity. So far, no signs of imminent production cuts by major integrated mills have been observed, even though spot prices are close to the bottom levels of last year. In this situation, there may still be some room for further downward movement.
As for the domestic mills, WISCO this week issued its galvanized coil ex-works prices, making no change from previous levels. Thus, the producer's price for 1.0 mm DX51D+Z material stands at RMB 4,293/mt ($629/mt), excluding VAT. The mills are also believed to be taking a wait-and-see approach, perhaps waiting for the cheaper iron ore prices. In this context, they are seeking to consume as much of their expensively-purchased iron ore stocks as possible.
Based on the situation observed this week, China's domestic HDG prices may continue to move on a declining trend next week, especially due to the high inventories and the poor transaction situation, and also considering that the mills are not cutting back on their production.