Chinese domestic HRC price begins to decrease, exports market still stable

Monday, 17 September 2007 11:49:11 (GMT+3)   |  
       

Following their sharp price increase in the Chinese domestic market within a relatively short period, HRC prices reached a peak in the middle of last week and began to come down again. Meanwhile, export offers are currently stable but not many deals are being concluded.

Due to the previous sharp price increase, both mills and traders have started to show concern regarding the future of the market. As a result, stockists have decided to start selling their stocks. The general view in the market is that prices have touched their peak and that the current decrease is a correction of the excessive increase seen in previous weeks. However, the decrease is not expected to be large due to the high raw material and freight costs.

The export market is relatively stable. Offers have been heard at around $590-600/mt FOB and at even higher levels for 3.0 mm thick products. Meanwhile, deals can only be concluded at around $550-560/mt FOB. Therefore, not many deals are being finalized and it is believed that a high quantity of products will remain unsold for November shipments.

First tier mills such as Benxi and Angang are offering hot rolled coil in a range of $590-610/mt without any clause for a potential export tariff change, remaining stable compared to previous times. Meanwhile, the second tier mills such as Baotou, Lianyuan and Jinan Steel have increased their offers to 600-610/mt FOB due to the strong domestic market and they are not willing to offer a high amount of products. Most of the offers from these mills include a clause for the equal sharing between buyer and seller of any export tariff increase.

In the domestic market, the price of 3.0 mm products has decreased from RMB 4,550/mt ($605/mt) in the middle of last week to RMB 4,450/mt ($592/mt) today. The prices are expected to decrease by RMB 100-150/mt ($13-20/mt) further during this week. Although the $10/mt decline in a single week seems strong, no panic sales or sharp slump is expected in the near future. Five to ten major HRC mills in northern China are expected to reduce their production in September due to overhauling works.

One important event last week - the Chinese government increased the interest rates once more in order to limit fixed asset investments.

Regarding the rumors of a tax rebate decrease and an export tariff increase; two different views are being heard. According to the first view, the export policy change was to be decided according to the August figures. As the August exports decreased, the government is not in a hurry to change the policy now. Meanwhile, according to the other view, as current steel prices are very high and as the government needs low-cost sources for the 2008 Olympic Games construction work, the export policy change is still on the agenda for October.


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