On May 24, China’s National Development and Reform Commission (NDRC) announced that it will monitor the price trends of bulk commodities and will punish speculative price rises, stressing its "zero tolerance" for illegal activities. This official announcement of the fight against high commodity prices has resulted in a sharp fall in spot HRC, rebar and billet prices, as well as in iron ore prices in China.
The NDRC together with four other government bodies, including the Ministry of Industry and Information Technology, held a meeting with associations, representing the iron ore, steel, copper and aluminum industries yesterday, May 23. “The relevant regulatory authorities will closely follow and monitor the price trends of bulk commodities, strengthen the joint supervision of bulk commodity futures and spot markets, having "zero tolerance" for illegal activities...,” the NMDC stated, adding that punishments will be very strict for such illegal acts like reaching agreements to implement monopolies, spreading false information, driving up prices, hoarding, and other illegal activities.
Ex-China HRC prices on the way to $900/mt FOB
Today, the average HRC price in China has come to RMB 5,420/mt ($841.5/mt) ex-warehouse, according to SteelOrbis’ information, which is RMB 230/mt ($36/mt) below the level last Friday. This has followed a plunge of four percent in HRC futures prices today. As prices have been going down so rapidly, most buyers are delaying their purchases, waiting for the market to stabilize first.
Some market sources believe that, after the latest spot HRC price decline, the market prices will have to fluctuate in a narrow range. The highest average HRC price level in China was at RMB 6,645/mt ex-warehouse on May 13, and since then prices have already lost more than RMB 1,200/mt or $186/mt.
Export HRC prices from China have continued to go down, following the trend in the local market. Official offers from mills for SS400 have declined by $25/mt to $990-1,000/mt FOB. At the same time, the tradable level for this grade for position cargoes has slipped to $930-940/mt FOB from $950-960/mt FOB late last week. “With the current local prices, export prices may go down further,” a trader said.
In Vietnam, buyers have been waiting for $950/mt CFR and below for ex-China SAE1006 position cargoes. Offers for SAE1006 HRC have been reported from traders at $960-970/mt CFR, while last week a deal was done at $980/mt CFR.
China more likely to export than import billet in near future
Steel mills in Tangshan have dropped their billet prices further to RMB 4,920/mt ($764/mt) ex-works, down by RMB 230/mt or $36/mt. This price translates to $676/mt, if excluding 13 percent VAT. And as a result, price assessments for import billet are standing at $650/mt CFR and $630-640/mt CFR, according to different sources. “In such a situation, China may restart exports, but will not import anything,” a trader said.
The latest offers for billets of different origins have been reported at $720/mt CFR to the Philippines, down from $730-740/mt CFR reported late last week. “I believe that $710/mt CFR is achievable,” a local trader said. No fresh offers from China have been reported so far. But Southeast Asian suppliers like Indonesia, Malaysia and Vietnam, who previously were fully focused on sales to China, have already started to be more active in offering to different outlets.
$1 = RMB 6.4408