Chinese HRC traders drive $10/mt week-on-week price jump, mills more cautious

Over the past week, ex-China hot rolled coil (HRC) offers from major mills have edged up only slightly this week, rising by around $2.5/mt on average week on week, while traders’ offers have posted a sharper increase of about $10/mt over the same period, creating turbulence in the global market. In the domestic market, sentiment has been buoyed by firmer HRC futures prices and cost-side support from higher coke prices, prompting mills to cautiously lift their offers, although actual trading activity has remained restrained amid seasonal demand pressures.

Specifically, export offers for boron-added SS400 HRC from large Chinese mills have moved to $480-490/mt FOB, with a midpoint at $485/mt FOB, up by $2.5/mt week on week. Meanwhile, smaller mills have been offering their HRC at around $480/mt FOB compared to $475/mt FOB last week, though occasional offers from small non-VAT Chinese mills are still voiced at lower levels of around $474/mt FOB, up by $10/mt week on week, according to sources.

Meanwhile, the tradable price for ex-China HRC from traders has settled at $475-485/mt FOB, depending on the destination, versus $465-475/mt FOB last week. In particular, according to sources, ex-China Q235 HRC in Vietnam stands at $487-490/mt CFR compared to $485-486/mt CFR last week. Besides, offers for ex-China Q235 and Q195 HRC in Pakistan have settled at $495/mt CFR and $492/mt CFR, respectively.

Besides, Chinese offers for Q195 HRC in Turkey have settled at $500-520/mt CFR, up by $10-17/mt week on week. Meanwhile, most offers for Q235 HRC in the Middle East have been voiced at $510-520/mt CFR UAE, up by $10-15/mt week on week, though, according to sources, a few offers from traders are voiced at $500/mt CFR UAE.

In the meantime, average HRC prices in the Chinese domestic market have edged up compared to the previous week amid increasing HRC futures prices. In particular, domestic HRC prices in China have settled at RMB 3,500-3,720/mt ($489.5-520/mt) ex-warehouse on July 29, with the average price level RMB 10/mt ($1.4/mt) higher compared to that recorded on July 22, according to SteelOrbis’ data.

On July 24, China’s National Development & Reform Commission (NDRC), the State Administration for Market Regulation, and other government departments jointly released a draft revision of the Implementation Regulations of the Price Law for public comment. The draft explicitly proposes “governing low-price disorderly competition among enterprises in accordance with the law and promoting the orderly withdrawal of backward production capacity,” marking the formal end of the era of “low-price competition” in the steel industry. It also signals the beginning of a new phase in China’s supply-side structural reforms, characterized by legalization and standardization.

HRC futures prices have strengthened in response to improved market sentiment. In addition, steelmakers are expected to implement production restrictions ahead of the September 3 military parade, lending further support to HRC prices. On the cost side, coke prices have recorded a fourth consecutive round of increases, firmly underpinning HRC prices.

However, recent heavy rains in Beijing and other northern regions, along with the approach of Typhoon Co-May, are likely to dampen downstream demand for HRC and weaken price support.

As of July 29, HRC futures at Shanghai Futures Exchange are standing at RMB 3,503/mt ($490/mt), increasing by RMB 26/mt ($3.6/mt) or 0.75 percent since July 22, while increasing by 2.01 percent compared to the previous trading day, July 28. 

$1 = RMB 7.1511