China’s hot rolled market softens, while its cold rolled market rises

Following the continuous price uptrend registered in past consecutive weeks, the Chinese cold rolled market has started to show variations as regards prices. While the mills' price increases constitute the main factor helping to push up current market prices, the optimism among traders has also played an important role in the trend of market prices. During the past week (May 19-26), cold rolled inventory in China's domestic market indicated a contraction.

During the week in question, China's domestic hot rolled market moved on a stable trend, with a softening observed at the higher price end. Meanwhile, some traders lacking confidence in the future market began to sell stocks at low prices. On the other hand, other traders decided to purchase material. On the whole, hot rolled prices are expected to continue to trend sideways during the coming week.

On May 21, hot rolled inventory in the Shanghai market stood at 790,000 mt, down 6,000 mt as compared to last week. Currently, inventory in the Shanghai region is high compared with past years, and so will probably create a certain amount of pressure for future market prices.

On the cold rolled side, prices maintained their upward trend over the past week. While some large steel mills such Anshan Steel and Benxi Steel raised their prices, market inventories are still decreasing and import arrivals are slower. Besides, firm demand and positive sales activities have both provided strong support for market prices. Despite the negative effect of the hot rolled price trend on the cold rolled market, thanks to the contraction of inventory most cold rolled traders are optimistic as regards the market's future prospects. For the next week, the domestic cold rolled market in China is expected to move on a stable trend.

Meanwhile, cold rolled inventory in the Shanghai region is 290,000 mt, a decrease of 30,000 mt from last week. For the past few weeks, cold rolled inventory in the this region has been on a downtrend, especially so in the current week, signaling the robustness of demand at the present time.

Recently, Taiyuan Steel raised its hot rolled coil price by RMB 304/mt ($45/mt) and so its ex-mill price for Q235 5.75 mm HRC is now standing at RMB 3,475/mt ($510/mt). Meanwhile, after Hebei Steel Group raised its hot rolled coil price by RMB 200/mt ($29/mt), its Q235 5.75 mm HRC price is now at RMB 3,400/mt ($499/mt). As a result of the price increase of RMB 20/mt ($3/mt) announced by Laiyang Steel, its ex-mill price for Q235 5.75 mm HRC is currently at RMB 3,810/mt ($559/mt). All the above prices include 17 percent VAT.

Due to a supply shortage of hot rolled coils, ex-CIS export prices have climbed up rapidly in recent times, and many orders have been cancelled. Currently, HRC offers from CIS countries to China are standing at $420-430/mt CFR for August delivery, up $10-20/mt compared with the beginning of May. Due to the antidumping investigation launched by China against Russian HRC imports, Chinese importers dare not conclude orders for June delivery. On the export side, HRC offers from China are now at $480-490/mt FOB, up $30/mt from last month. As reported by the international trading companies, the most recent enquiries are mostly coming from South Korea and elsewhere in Southeast Asia, but without any deals being concluded.

With the international cold rolled market indicating a positive trend, cold rolled offers from China have shown a big increase. In the past week, one foreign trading company obtained tenders from a Russian supplier for CQ08kp (0.6-2.0mm) CRC priced at $480/mt CFR, increasing by $50-60/mt compared with the beginning of April.