During the week ending May 27, HDG have continued to trend down in the Chinese domestic market. As new arrivals increase in the market, pressure coming from inventories has been rising. As of May 27, average HDG prices in the main Chinese cities are as follows:
Product name | Specification | Category | Average price (RMB/mt) | Weekly change (RMB/mt) | Price ($/mt) | Weekly change ($/mt) |
Thick HDG | 1.0 mm x 1,250 mm | SGCC | 5,300 | -33 | 777 | -5 |
Thin HDG | 0.5 mm x 1,000 mm | SGCC | 5,477 | -90 | 803 | -13 |
For now, the domestic sales price of 0.3 mm full hard coil is at around RMB 5,000/mt ($733/mt). Slack demand has been observed in the market for galvanized steels for non-construction applications. At present, ex-Baotou Steel HDG offers stand at RMB 5,330/mt ($781/mt), including 17 percent VAT. While Tangshan-based Hengtong Steel's offers for 1.0 mm HDG are now at RMB 5,260/mt ($771/mt), excluding 17 percent VAT.
Traders are now coming under great pressure from the increasing market inventories due to recent new arrivals. Most traders have been trying to sell off stock materials. The current fragile market seems to be very sensitive to any changes in the futures markets. In the middle of the past week, some declines were seen in the futures markets, which were almost instantly reflected in the HDG market.
Recently, Australian miner Rio Tinto announced iron ore contract prices for the second quarter of this year. Accordingly, the FOB price of fine ores with Fe content of 63.5 percent is at $123/mt, and the price is expected to go up further in the third quarter. Thus, local steel mills will likely bear higher production costs in the future, forcing them to transfer raw material price increases on to the prices of their finished products. At the same time, the poor transaction situation will tend to hinder any price increases.