Chinese HRC exporters more bearish, affected by local and futures price drops

The decreasing trend of HRC futures prices in China together with the weaker local market have made Chinese HRC exporters even more aggressive in decreasing offers this week. Some lower levels have already been accepted by a number of customers, while bids have continued to decrease.

At present, export offers for boron-added SS400 HRC from the large major Chinese mills are at $550-570/mt FOB, for July shipment, with a midpoint at $560/mt FOB, losing another $12.5/mt over the past week. “Prices have decreased by more than $10/mt from Chinese mills, while some mills like Benxi and Shagang have been asking around $560/mt FOB, down by more than $20/mt compared to their previous offers a few days ago,” a market insider said.

At the same time, smaller mills and traders in China have decided to go lower as well, and, thus, the tradable level for ex-China SS400 HRC has decreased by $10/mt on average to $525-535/mt FOB. “Bids are decreasing as fast as offers,” a source said. At this level, some small-volume deals for SS400 HRC have been reported in Vietnam at $538/mt CFR, versus $550/mt CFR last week, while Vietnamese customers are already bidding at $530-532/mt CFR, against offers at $535-540/mt CFR. Besides, suppliers from Pakistan are reported to have booked ex-China SS400/Q195 HRC at $555-565/mt CFR, down by $10/mt week on week. Meanwhile, ex-China Q195 HRC offers in Turkey and the UAE have been voiced mainly at the same level as last week, at $580/mt CFR and $570-575/mt CFR, respectively. “Chinese mills are offering at $610-615/mt CFR UAE, while offers from traders are around $40/mt lower,” an international trader said.

In the SAE1006 HRC segment, Chinese suppliers have also been bearish, but very few deals have been confirmed so far. For instance, offers for SAE1006 HRC from Chinese traders to Vietnam have dropped to $560-570/mt CFR from $590-600/mt CFR last week. In Pakistan, offers for SAE1006 coils have also decreased to $570-580/mt CFR, versus $590/mt CFR last week.

In the meantime, HRC prices in the Chinese domestic market have moved down further following Chinese steelmaker Shougang Group’s decision to cut its HRC prices by RMB 200/mt ($28.4/mt) for delivery in June, which negatively affected market sentiment. It is notable that domestic HRC prices in China have settled at RMB 3,750-3,970/mt ($556-591/mt) ex-warehouse on May 23, with the average price level RMB 57/mt ($8.1/mt) lower compared to that recorded on May 16, according to SteelOrbis’ data.

During the given period, demand from downstream users has not been as good as market players had expected, signaling the prevailing bearish sentiments among market players. Currently, steelmakers are still implementing production restrictions amid maintenance works, which will bolster HRC prices to some extent. At the same time, iron ore prices have edged down, weakening the support for HRC prices from the cost side.

As of May 23, HRC futures at the Shanghai Futures Exchange are standing at RMB 3,651/mt ($519/mt), decreasing by RMB 57/mt ($8.1/mt) or 1.54 percent since May 16.

$1 = RMB 7.0326