Steel futures in China have posted a rebound on Monday, February 21, supported by expectations of a production and consumption rebound in the near future and higher investments in real estate, while raw material prices are also showing signs of improvements.
Nevertheless, the recent increase in spot prices in China, following the rises in futures prices, has not changed the mood in the export/import markets for major products like HRC and billets so far.
Local HRC spot prices up in China, interest in exports to continue
As anticipated, Chinese mills returned from the holidays in the second week of February with higher offers for HRC. However, the trend appeared to be short-lived as Chinese traders started to offer and sell HRC position cargoes in the export market at much lower prices. In particular, the tradable level for SS400 HRC dropped to $785-795/mt FOB last week, with a number of deals concluded at $815-825/mt CFR Vietnam and at $840-850/mt CFR Pakistan. Meanwhile, this week has started to bring some positive sentiments to the Chinese HRC market with a slight rebound in futures prices, up by RMB 52/mt ($8/mt) since Friday, February 18, to RMB 4,959/mt.
Furthermore, domestic HRC prices in China have followed this growth, reaching RMB 4,955/mt ($782/mt) ex-warehouse, up by RMB 45/mt ($7/mt) on February 21, according to SteelOrbis’ data. “This afternoon futures increased, so I believe traders will withdraw their offers at $820-825/mt CFR in Vietnam,” a Vietnam-based trader told SteelOrbis. “We expect that steel prices will rise strongly in two or three more steps, before being corrected,” another trader said.
However, despite some expectations for a rebound in the local market, Chinese mills will likely be interested in further increasing HRC exports in the short run, according to market participants. “The market expects steel mills will resume production after the Winter Olympics and higher downstream demand, but for now the local market in China seems to be still quiet,” a market insider stated. On Monday, February 21, ex-China HRC prices in Vietnam have remained mainly unchanged compared to last week, standing at still competitive levels - $855-860/mt CFR for SAE1006 HRC and at $820-825/mt CFR for SS400 HRC. “New offers now are quite stable since most mills have completed their orders for next shipments. We can see a real price next week,” a representative of a Vietnam-based mill stated.
Imports of billets to China unlikely to improve as bid-offer gap still too big
Average local billet prices in China have added RMB 40/mt ($6/mt) over the weekend, reaching RMB 4,730/mt ex-warehouse or $660/mt, excluding 13 percent VAT. The same increase has been seen from the Tangshan mills, to RMB 4,670/mt ex-works.
The sentiment in China has been supported by a RMB 66/mt ($10/mt) rise in rebar futures at Shanghai Futures Exchange to RMB 4,845/mt ($764/mt).
Though the stronger rebar futures usually support import billet prices in China, for now the tradable levels are $660-670/mt CFR, up by $5/mt since last week. This is still too low to attract any volumes from abroad, according to sources.
The latest offers for imported billet to China have been at $710-720/mt CFR for material of different origins, so the gap between offers and bids is still too big at $50/mt.
Market players believe that more time is needed for billet prices to return to the levels at which imports to China will become reasonable again. In contrast, the tradable level for imported billet in Southeast Asia has increased further, to $700-710/mt CFR, up from $690-700/mt CFR last week.
According to sources, about 11,000 mt of ex-Vietnam IF billet were sold by a trader to the Philippines at $705-710/mt CFR last week. “Most bids are at $700/mt CFR, but you cannot find this anywhere,” a trader said. Non-IF billets have been offered to the Philippines at $715-725/mt CFR over the past week as, even despite low demand from China, suppliers have been confident that prices will increase. The lowest offer price has been reported at $715/mt CFR from Dexin in the local market in Indonesia and to other Southeast Asian countries.