Ex-China HRC prices fall sharply from both mills and traders as market mood worsens again

Although at the beginning of last week some rebounds were seen in ex-China HRC offers from traders following the better mood in the local and futures markets, this week has started with another price drop in China, with both mills and traders going lower. Thus, considering Chinese exporters’ readiness to provide significant discounts, trade activity has improved slightly not only in the traditional markets but also in higher-priced destinations, like Turkey. Meanwhile, HRC prices in the Chinese domestic market have moved down amid major Chinese steelmaker Baosteel’s decision to cut its HRC prices by RMB 200/mt ($29/mt) for delivery in June, which exerted a negative impact on market sentiments. 

At present, export offers for boron-added SS400 HRC given by major Chinese mills are at $560-585/mt FOB for mainly July shipments, with a midpoint at $572.5/mt FOB, down by $12.5/mt week on week. “Offers from Benxi Steel have dropped by $20/mt to $580/mt FOB, offers from Rizhao Steel have been heard at $585/mt FOB, while offers from Baotou Steel have steeled at $560/mt FOB,” a market source said. 

At the same time, Chinese traders who made some attempt to increase their offers last week, have been less positive this week, decreasing their quotes to all main trade destinations given the drops in local and futures prices in China. Thus, the tradable level for ex-China SS400 has been assessed at around $530-550/mt FOB, down by $20-30/mt week on week. Offers for ex-China SS400 HRC in Vietnam have decreased by $10-15/mt over the past week to $550-555/mt CFR, with bids falling to $542-547/mt CFR. Meanwhile, according to sources, Chinese suppliers have managed to sell around 40,000 mt of Q195 HRC at $585-590/mt CFR in Turkey this week, while some occasional offers have already been heard at as low as $580/mt CFR, versus offers at $595-600/mt CFR last week. Furthermore, suppliers from the Middle East, the UAE in particular, have reported ex-China SS400 HRC offers at $570/mt CFR through traders, compared to $600/mt CFR last week. 

In the SAE1006 HRC segment, offers from Chinese suppliers have been reported at $590-600/mt CFR Vietnam, versus $610-615/mt CFR last week, with a deal for around 5,000-10,000 mt is reported to have been done at $590/mt CFR. “I think we can already reach $580/mt CFR in new ex-China deals this week,” a Vietnamese trader told SteelOrbis. 

During the given period, HRC producers in China have continued to reduce their outputs, trying to ease the pressure from the supply side. However, major Chinese steelmakers have stated that their orders received from buyers have not been good as most clients have chosen to replenish stocks occasionally instead of building high inventory levels. Since the ‘plum’ rain season is coming in China, it will be the traditional offseason for the steel industry, which will negatively affect HRC prices. Moreover, raw material prices have decreased, weakening the support for HRC prices from the cost side. It is thought that HRC prices in the Chinese domestic market will likely edge down in the coming week. 

Domestic HRC prices in China have settled at RMB 3,800-4,040/mt ($556-591/mt) ex-warehouse on May 16, with the average price level RMB 67/mt ($9.6/mt) lower compared to that recorded on May 9, according to SteelOrbis’ data. 

As of May 16, HRC futures at the Shanghai Futures Exchange are standing at RMB 3,708/mt ($533.5/mt), decreasing by RMB 66/mt ($9.5/mt) or 1.75 percent since May 9. 

$1 = RMB 6.9506