Increase expected in Chinese flat prices after the holiday

Chinese mills and traders are expected to increase their export offers for flat products after the holiday, resisting the effects of the tax rebate reduction. Meanwhile domestic market prices may also increase in week 41. After experiencing an almost two-month-long decrease in July and August, Chinese hot rolled product prices began climbing in the first week of September - mainly supported by the ex-factory price hikes of Baosteel in particular, and also those of the other major mills. However, the prices began to fluctuate downwards in the second week, before rebounding again towards the end of September. The final picture at the beginning of October is the spitting image of the sitaution at the beginning of September, with 2.75 mm hot rolled coil domestic market price levels unchanged at around RMB 4,150/mt ($525) in Shanghai, RMB 4,300/mt ($544) in Guangzhou and RMB 4,050/mt ($512) in Beijing. While cold rolled coils began September with a slight decrease, the increase in hot rolled coil prices led cold rolled coil prices in turn to begin moving up in the second week of September. The dead season was not over for cold rolled coils and the demand was low, however both the demand and the prices gradually picked up towards the end of September. Currently, 1.0 mm cold rolled coil prices are at RMB 4,850/mt ($614) in Shanghai, up RMB 320/mt ($40) from week 35; at RMB 4,850/mt ($614) in Guangzhou with an increase of RMB 100/mt ($12), and at RMB 4,900/mt ($620) in Beijing, i.e., up RMB 100/mt ($12). Right after the holiday, flat product prices in the Chinese markets may see a sharp increase followed later by a gradual decline – due to the rush of end-users and traders anxious to refill their stocks. Meanwhile, the latest hot rolled coil export offers from China are at around $470-475/mt FOB slightly down from the $475-480/mt FOB offers at the beginning of the month, while hot rolled plate export offers from China to India are at around $485-490/mt CFR Mumbai, and at around $470-475/mt FOB for SS400 grades. Plates from Baosteel's Shanghai No. 3 plant are at $510-520/mt FOB for A36 grades. Chinese HDG offer prices increased around $15-20/mt from the beginning of September to the current $685-700/mt FOB level. The export offer prices of Chinese flat products are increasing in Southeast Asia, and Chinese mills are expected to increase their prices further following the holiday. Traders are claiming that the 3 percent tax rebate reduction is causing them to increase their prices in order to make up the difference. Besides, the recent price hikes of Indian mills and Taiwan-based China Steel will also be influential in the ex-China export prices of the post-holiday period. On the other hand, Chinese flat product export offers to the US have softened by around $20/mt. At US Gulf ports, China-origin hot rolled coils are offered at around $630-650/mt FOB loaded truck, while cold rolled coils are offered at around $680-700/mt FOB loaded truck. The softening in the domestic US market may lead to a further slowdown in offer levels.