China’s hot rolled prices pick up again

Following the announcements of HRC price hikes by Baosteel and WISCO for August, market confidence has been boosted in the past week, giving impetus to the upward trend of market prices. Meanwhile, export quotations of Chinese HRC have been maintaining a stable trend, against the background of a significant reduction in the trading volume.

In eastern China, confident in the future most traders have seemed reluctant to lower their prices, leading to relatively high market quotations during the past week. In this context, some optimistic traders actively purchased low-price materials for stockpiling purposes in the past week, while only limited purchases were made by end-users. Meanwhile, the market in the north has seen successive arrivals of new HRC materials from Chengde Steel, Baotou Steel, Tangshan Steel and Tiantie; however, market inventories in this region have remained at relatively low levels. Local market players are currently not under too much pressure to perform sales. In the southern regions, it is reported that Zhujiang Steel has cut its HRC production by 70 percent for July, with its supply to Lecong expected to amount to only around 20,000-30,000 mt in the same month.

In addition, it is said that hot rolled supplies from China's major mills will drop down in July compared with the June levels. For instance, Tangshan Steel has reportedly registered a 50 percent fall in its ordering volume for July, while the contract volumes of Angang and Benxi Steel are down by 10 percent and 70 percent respectively from June levels. Nevertheless, due to the continuing sluggish demand, market inventories have still climbed up by a certain margin. Generally speaking, considering sufficient capital availability and the general optimism of market players, China's domestic hot rolled market is expected to continue its uptrend in the coming week.

Last week, market inventory levels in most Chinese regions posted different degrees of increase, with the only exceptions seen in the central, northwestern and northeastern regions. According to the latest figures, hot rolled inventory in Shanghai amounted to 840,890 mt on July 9, up 19,670 mt compared with the level on July 2.

On July 7, WISCO raised its common carbon HRC prices for August by RMB 240/mt ($35/mt). After the adjustment, the price of 2.75 mm Q235 HRC is at RMB 3,800/mt ($556/mt), while that of 5.5 mm Q235 HRC is at RMB 3,740/mt ($548/mt), effective as of July 7, 2009.

On July 13, Baosteel announced its ex-factory prices for flat steel products for the month of August, with SS400 prices rising by RMB 350/mt ($51/mt) and SPHC prices up by RMB 500/mt ($73/mt). As a result, the producer's new price of 5.75 mm x 1,250 mm x C SS400 is now at RMB 3,942/mt ($577/mt), while that of 2.0 mm x 1,250 mm x C SPHC stands at RMB 4,492/mt ($658/mt), effective from July 13, 2009.

All the above prices exclude 17 percent VAT.

China's HRC export prices have been moving on a stable trend throughout the past week. According to most exporters, the trading volume has observed a remarkable shrinkage following the previous increase in export prices. At present, export quotations of common carbon hot rolled coils from China remain at $520-530/mt FOB.