Chinese HDG market declines as large mills keep prices unchanged

China's domestic HDG market has maintained its declining trend during the past week. Baosteel, Angang, WISCO and other large-scale local mills have kept their February HDG prices unchanged at January levels, thereby frustrating the expectations of traders and exerting downward pressure on the market.

Over the past week, Baosteel, Angang, WISCO and other large-scale mills have all decided to keep their HDG prices unchanged for February, exerting downward pressure on the domestic market, which had previously been boosted by the mills' ex-factory price hikes. In the context of the sluggish trading performance observed in the market, some medium and small mills have had to lower their ex-factory prices so as to stimulate sales. Moreover, traders with some low-cost December materials in hand are likely to sell off these products at low price levels as the domestic market weakens.

At present, the HDG market in northern China is characterized by an abundance of supplies, with market inventories in the south and east remaining at normal levels. Since the current season is traditionally a slack one for the HDG market in China, domestic demand has recently been on the lackluster side. On the other hand, some downstream players are looking forward to a further decline in HDG prices and are planning to make purchases for their stocks.

In general, the decisive factor for the market is currently the influence of China's macroeconomic policy rather than supply and demand. It is heard that China's central bank is likely to increase interest rates, signaling that China is seeking to tighten capital supply this year, which would exert further downward pressure on the finished steel markets in China.