Chinese HRC exporters maintain high prices despite worse mood in futures and local markets

As HRC futures prices have continued to move down again this week, affecting domestic HRC prices in China, most China HRC exporters, especially big mills, have been cautious though not in a hurry to decrease their offers to foreign buyers given the bullishness mounting in many markets globally. However, according to market insiders, the tradable price levels have softened slightly this week, as some Chinese traders have been trying to sell in short positions, decreasing their prices. 

At present, export offers for boron-added SS400 HRC from major Chinese mills have settled at $575-580/mt FOB, for January and also February shipments, with the midpoint at $577.5/mt FOB, up by $2.5/mt on average over the past week. Besides, according to sources, one of the Chinese mills, Benxi Steel, is still offering at $590/mt FOB, but this price is not workable. 

Meanwhile, the tradable price level for ex-China SS400 HRC has been estimated at around $550-560/mt FOB, mainly stable over the past week, though lower offers have started to appear from Chinese traders who expect to sell in short positions. At the same time, while ex-China trade in Vietnam has remained moderate, with most offers for SS400 and Q195 HRC reported at $560/mt CFR and $555/mt CFR, respectively, Chinese suppliers have managed to sell large tonnages up to at least 80,000 mt in Turkey. In particular, around half of the tonnage was sold as Q195 HRC at around $560-565/mt FOB, and another part was sold as SAE1006 HRC with some size extras, at around $615-620/mt CFR or $575-585/mt FOB, for January shipment. Meanwhile, most ex-China Q195 HRC offers have been voiced at around $605/mt CFR this week, according to sources. 

Furthermore, following numerous ex-China SS400 HRC deals reported in the Middle East during the last two weeks, this week no new bookings have been heard so far, while ex-China SS400 HRC offers have settled at $590-600/mt CFR, against deal prices at $590-595/mt CFR last week.  

In the meantime, average HRC prices in the Chinese domestic market have declined amid slow consumption and the increased gap between supply and demand. Specifically, domestic HRC prices in China are at RMB 4,050-4,130/mt ($570-582/mt) ex-warehouse on December 5, with the average price level RMB 30/mt ($4.2/mt) lower compared to November 28, according to SteelOrbis’ data. 

During the given week, demand from downstream users has slackened, resulting in slower consumption, which has exerted a negative impact on HRC prices. At the same time, HRC futures prices have indicated a declining trend, also weakening the support for prices in the spot market. Moreover, cautious sentiments have prevailed among market players, negatively affecting HRC prices. 

Furthermore, Jiangsu Province-based Shagang Group, China’s largest private steelmaker, has announced stable HRC prices for December this year, signalling its cautious sentiment as regards the outlook for the HRC market.

As of December 5, HRC futures at the Shanghai Futures Exchange are standing at RMB 3,971/mt ($559/mt), decreasing by RMB 42/mt ($6/mt) or down by 1 percent since November 28, though declining by 1.02 percent compared to the previous trading day.

$1 = RMB 7.1127