During the past week the Chinese HRC market has continued to trend downward. The big three iron ore giants plan to increase their iron ore and coal contract prices for the third quarter, and the rising raw material prices are increasing the pressure on Chinese steelmakers, who are already facing losses. Weak demand in downstream industries provides little support for upward momentum in the HRC market. During the past week, major domestic steelmaker Baosteel lowered its HRC prices for July shipment, exerting a negative impact on the local HRC market.
Product name | Specification | Category | Average price (RMB/mt) | Weekly change (RMB/mt) | Price ($/mt) |
HR | 5.75 mm x 1,500 mm | Q235B | 4,180 | -70 | 613 |
HR | 2.75 mm x 1,250 mm | Q235B | 4,313 | -94 | 632 |
During the past week, apart from weak demand, concerns have been raised in the market by increased supplies and rumored government measures. In June, most Chinese steelmakers have no plans for equipment overhauls and production cutbacks. When exports meet with obstacles, supplies flow back to the domestic market and domestic HRC inventory increases. Meanwhile, there is still a rumor that the export tax rebate will be canceled, and some traders report that Chinese banks are slower to issue credit. As for the future market outlook, most traders are pessimistic. They consider that, influenced by the abovementioned factors, profits will decrease and prices may trend downward.
On June 1, LY Steel lowered its HRC price by RMB 100/mt ($15/mt), with its ex-mill price of Q235 5.75 mm HRC now at RMB 4,590/mt ($673/mt). On the same date, Shagang Group reduced its HRC price by RMB 300/mt ($44/mt), with its Q235 5.75 mm ex-mill HRC price declining to RMB 4,500/mt ($660/mt). The above prices include 17 percent VAT. On June 4, Baosteel published its prices for July delivery, lowering its HRC price by RMB 300/mt ($44/mt).
During the past two weeks, Chinese steelmakers and foreign trade companies have been agreeing prices based on the specific circumstances involved in deals, and so various quotations are reported in the market, while few actual transactions are heard. So far, there has not been any official confirmation of the rumored cancellation of the nine percent export rebate; however, in the past week many steelmakers and foreign trade companies have agreed that, if the export tax rebate is confirmed, each side will assume half of the additional expense.
Generally speaking, increased inventory and weak demand means it is difficult for HRC prices to climb upward. For the coming week, it is thought that the Chinese HRC market may trend slightly downward.