Chinese HRC market rises as inventory still declines

During the past week the Chinese hot rolled coil (HRC) market has fluctuated on an upward trend, while market inventory has continued to decline. Average HRC prices in the main markets in China are currently as follows:

On December 7, Q235/S400 5.75 mm hot rolled coil (HRC) prices stand at RMB 4,330/mt ($651/mt), RMB 4,360/mt ($656/mt) and RMB 4,480/mt ($674/mt) respectively in the Shanghai, Tianjin and Lecong markets. In addition, Q235 2.75 mm HRC stands at RMB 4,500/mt ($677/mt), RMB 4,420/mt ($665/mt) and RMB 4,630/mt ($696/mt) respectively in the abovementioned markets. All the above prices include 17 percent VAT (US$1 = RMB 6.65).

During the past week, the Chinese HRC market has continued to increase while inventory has maintained its downtrend. HRC market inventory in Shanghai has now declined for six consecutive months. The overall drop in inventory in China has been caused by the stability of steel prices and by the active purchases of downstream buyers. In addition, there is a greater focus on coal transportation in northern areas, and this has had a negative impact on new deliveries in the HRC market. 

On December 3, aggregate hot rolled coil inventory in the main Chinese cities was 4.5819 million mt, down 78,500 mt week on week. The biggest decrease in inventory was registered in eastern China. Inventory in Shanghai on December 3 was 1,836,500 mt, down 12,090 mt week on week.

Many traders are optimistic about the prospects for Q1 2011, and so some of them are gradually increasing quotations; however, the transaction volume at higher price levels has not been great. At present, the domestic and international market environment is stable, providing support for the HRC market.

In general, it is expected that the Chinese HRC market will fluctuate upward in the coming week.