Chinese HRC market continues to rise strongly

In the past week the Chinese domestic HRC market has maintained a strong increasing trend, with transaction activity at positive levels. In addition, Chinese HRC export quotations have continued to increase, with a significant number of bookings being concluded by producers. Traders are optimistic about the prospects for the future market.

Four factors have contributed to the continuing HRC price uptrend in the Chinese market. 1) With the weather getting warmer, demand from the downstream industry has been increasing. 2) Given the continuing high prices of raw materials such as iron ore and coke, steel manufacturers' production costs are increasing. 3) Traders are optimistic about the prospects for the future market and are pushing up their prices. 4) The recovery in the international market recovery has resulted in a release of overseas demand, causing Chinese HRC export order volumes to increase and thereby relieving inventory pressure in the domestic market.

However, as prices continue to increase, risks also appear in the market. For example, traders' higher inventories and the higher costs of supplies do not favor the stability of future market transaction prices. In addition, uncertainty surrounds the iron ore price negotiations and the government's macroeconomic policy. 

HRC inventory has continued to decrease in the main markets in China. On March 19, overall HRC inventory in the leading Chinese markets totaled 4,929,000 mt, down 129,900 mt on the previous week and up 105 percent compared with the same period last year. Inventory in northern China registered the greatest decrease during the week in question, followed by eastern China. Meanwhile, the southern Chinese market recorded a small increase in inventory levels. On March 19, HRC inventory in the Shanghai market stood at 1,847,080 mt, up 420 mt week on week 

With regard to the mills' prices, on March 16 Baogang, Liangang and Xingang all increased their HRC prices by RMB 200/mt ($29/mt), with their Q235 5.75 mm HRC ex-factory prices now at RMB 4,130/mt ($606/mt), RMB 4,380/mt ($642/mt) and RMB 4,150/mt ($609/mt) respectively. On March 17, Jigang raised its HRC price by RMB 300/mt ($44/mt), with its ex-factory price of Q235 5.75 mm HRC rising to RMB 4,130/mt ($606/mt).

Since the Chinese Spring Festival (February 14-21), Chinese HRC product export prices have remained on an upward trend. An increase has also been seen in the past week, of about $30/mt. Current Chinese HR export prices are around $640-680/mt FOB, with mainstream prices at around $650-660/mt FOB. There is some disorder as regards market price quotations. From feedback in the market, recent transaction prices for Chinese HRC exports can reach $620/mt FOB. Few transactions are concluded above this level.

A large steel manufacture in North China has issued HRC export quotations at about $660-680/mt FOB. A manufacturer in the Jiangsu area is offering HRC for export at around $660/mt. One producer in Hebei Province has to deliver a large amount of products to the domestic market, and so it is not exporting at present.

To sum up, players are generally optimistic about the prospects for the market in the coming period. An upward trend is expected for the coming week, but some traders have become more cautious.