Chinese HRC exporters attempt further price rises amid hikes locally, overseas demand still an issue

Ex-China hot rolled coil (HRC) offers price have edged up once again this week given the rising trends of local and futures prices amid the prevailing improved sentiments due to the issuance of stimulus policies and the further rise in raw materials prices, for iron ore in particular. However, although the tradable level has increased as well in new offers to different destinations, business activity has remained rather limited due to insufficient demand globally.

At present, export offers for boron-added SS400 HRC given by major Chinese mills are at $550-575/mt FOB for mainly January shipment, with a midpoint at $562.5/mt FOB, up by $17.5/mt week on week. According to sources, the highest level of the range is rather ‘notional’ and reflects big sellers’ price ideas, like price ideas from Benxi Steel, rather than real offers that could be workable. “Mills have been very optimistic recently in terms of their new prices, but the question is will they be able to sell at this level? Some customers need to buy, but still not big volumes, so the majority will remain cautious,” an international trader told SteelOrbis.

Meanwhile, the tradable level for SS400 HRC has been heard at $525-545/mt FOB, up by $9/mt on average over the past week, with the lower end of the range corresponding to traders' offers in Vietnam at around $535-545/mt CFR, up by $5-10/mt week on week, while the higher end corresponds to offers to other destinations, such as Turkey and the Middle East. Specifically, ex-China HRC offers in Turkey and the Middle East have been voiced at $580-585/mt CFR, up by at $10/mt week on week. Meanwhile, according to sources, ex-China HRC prices have been increasing in South America since last week on demand increase expectations. In particular, offers and deal prices in Brazil have been reported at $600/mt CFR, up by $10/mt week on week, while to Chile they have been at $607-620 CFR. Meanwhile deal prices to Peru have been heard at around $600-607/mt CFR.

In the meantime, average HRC prices in the Chinese domestic market have moved on an uptrend amid the firm demand from downstream users. More specifically, domestic HRC prices in China are at RMB 4,000-4,200/mt ($557-585/mt) ex-warehouse on November 7, with the average price level RMB 77/mt ($14.3/mt) higher compared to that recorded on October 31, according to SteelOrbis’ data.

During the given week, import iron ore prices have moved up, providing solid support for HRC prices in the spot market. At the same time, northern China has entered the winter heating season, resulting in firm demand for coke and coking coal, exerting a positive impact on their prices, which has also bolstered HRC prices from the cost side. Inventory of HRC has been at relatively low levels, positively affecting prices. Some HRC producers have implemented production restrictions, reducing the supply and likely pushing up prices. According to sources, the demand for HRC is expected to remain quite good in the near future amid the prevailing improved sentiments due to the issuance of stimulus policies. Thus, it is thought that HRC prices in the Chinese domestic market will continue their uptrend in the coming week.

As of November 7, HRC futures at the Shanghai Futures Exchange are standing at RMB 3,889/mt ($542/mt), increasing by RMB 40/mt ($5.6/mt) or up by 1.0 percent since October 31.

$1 = RMB 7.1776