China’s HR market posts upturn: Temporary correction or genuine rebound?

Tuesday, 20 October 2009 15:47:01 (GMT+3)   |  
       

As a result of sluggish market demand and relatively high inventory levels, during the past week Chinese hot rolled prices initially continued their declining trend; towards the end of the week, however, prices began to climb back up. According to many players, the latest upturn in prices is just a correction and cannot be regarded as a real rebound. In the context of high steel outputs and lofty market inventory levels, market players differ in opinion as regards the future trend of the domestic market.

Product name

Specification

Category

Average price(RMB/mt)

Weekly change (RMB/mt)

Price($/mt)

HR

5.75 mm x 1,500 mm

Q235B

3,450

+147

506

HR

2.75 mm x 1,250 mm

Q235B

3,627

+137

532

In the wake of the announcements of November price policies by Baosteel and Baotou Steel, Angang and WISCO also issued their latest prices in the past week.

On October 14, Liaoning Province-based Chinese steelmaker Angang announced its ex-factory prices for flat steel products for November delivery, with hot rolled prices down by RMB 300/mt ($44/mt) compared to the levels for October. Thus, the producer's price of 5.5 mm x 1,500 mm Q235 is RMB 2,730/mt ($400/mt), while that of 5.5 mm x 1,500 mm SPHC is RMB 2,780/mt ($408/mt).

On October 14, Hubei Province-based Chinese steelmaker Wuhan Iron and Steel Corporation (WISCO) made a downward adjustment of RMB 350/mt ($51/mt) to its HRC prices for November delivery. After the change, the price of 2.75 mm Q235 HRC is at RMB 3,950/mt ($579/mt), while that of 5.5 mm Q235 HRC is at RMB 3,890/mt ($570/mt).

All the above prices exclude 17 percent VAT and are effective as of October 14, 2009.

On the export side, Chinese HRC exports have been showing quite an active performance, especially to countries in Southeast Asia. Since the beginning of September, China's hot rolled exports have registered an obvious increase compared with the July and August levels. At present, mainstream export quotations of Chinese HRC are in the range of $450-470/mt FOB, but many large-scale mills have offered their hot rolled coils below the level of $460/mt FOB. According to reports, an eastern-based mill is now offering HRC to its most important customers at $450/mt FOB, while a mill in the north is selling HRC to its most important customers in South Korea at the level of $460/mt CFR. With different discounts granted to various customers, a certain degree of confusion has been observed as regards current market quotations.

Generally speaking, market players have differed in opinion as regards the recent price upturn. Some traders think that high inventory will continue to have a negative impact on the market, and that the rise in price is just a temporary market correction; meanwhile, others expect that the rising trend will continue as, in their view, the market has already touched bottom. Overall, with inventory pressure still opposing a further price ascension, it seems most likely that hot rolled prices in the Chinese market will slide down again in the near future.


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