Chinese HRS&C likely to stay on downward course

Chinese HRS&C likely to stay on downward course

In line with market expectations, Chinese hot rolled sheet/coil (HRS&C) prices resumed their downward trend after a 10-day price rally. On Thursday, November 3, HRS&C prices in China’s major markets experienced an overall price drop. Medium HRS&C prices in these three main markets fell by RMB 67/mt ($8/mt), but the decrease range narrowed afterwards. Compared to the previous week, by the end of trading on Monday, November 7, the average price of 5.75mm*1500*C SS400 in Tianjin, Shanghai and Lecong was down RMB 133/mt ($16/mt) to RMB 2’970/mt ($368/mt). 2.75mm*1250*C Q235B/SPHC was down RMB 83/mt ($10/mt) to RMB 3’317/mt ($410/mt), while imported 2.0mm*1250*C 08YU, was down RMB 125/mt ($15/mt) to RMB 3’450/mt ($427/mt), excluding Tianjin. The reason we say that the price fall is in line with market expectations is because the price rally did not have a solid foundation. The price increase that began on October 25 was a function of the unanimous opinions that thought prices would go up. However, the basic market condition did not witness substantial changes. After the price increase, traders concluded their deal prices at different levels, showing their pessimistic attitudes. Prices in the Shanghai market, where the rally met its end, were stable on November 1 and November 2. However, some traders had already cut their prices for some specifications, leading to changes in the attitudes of market players. In particular, on Wednesday, November 2, new batches of products from major steelmakers such as Lianyuan Steel, Baotou Steel and Jiuquan Steel arrived in the market. Traders whose attitudes were not optimistic adjusted their prices one after the other. Even though few new batches of products arrived in major markets such as Tianjin and Lecong, it is natural that prices also plummeted there since the Shanghai market has a great influence on those markets. Not many deals were concluded in Tianjin and Lecong when prices were stable. The current HRS&C market has not seen significant changes. Market rumors say that at the meeting with China’s top ten iron and steel companies held on Thursday, November 3, the National Development and Reform Commission indicated that the current price decline is reasonable and is the result of changes in the supply and demand relation. If what the Commission says is to be believed, then it is highly unlikely that the Commission itself will take actions to counteract the price decline. In the short term, there will be new batches of products arriving in domestic markets in early and mid November. Market sources report that new batches of products from Tangshan Steel and Lianyuan Steel will arrive in the Lecong market around November 10. Under these circumstances, traders think that HRS&C prices will keep decreasing in the short term. In general, the HRS&C market did not undergo great changes. In the short term, changes in new batches of products will be an important factor that might influence the market condition. HRS&C prices are likely to continue the downward trend. SteelOrbis Shanghai