Ex-China HRC offer prices have moved up over the past week amid the possibility of a tax rebate cut in China and market players’ willingness to bolster offer prices due to the approach of the Chinese New Year holiday (February 11-17). Nevertheless, the recent weakness of local prices for HRC in China and the drop in iron ore prices have increased the bearishness of the market outlook.
At present, export offers for boron-added SS400 HRC given by major Chinese mills are at $665-695/mt FOB for April shipment, with the midpoint at $680/mt FOB, moving up by $35/mt on average compared to January 26. Steelmakers have started to increase prices since Friday, January 29, as talks about a decrease of the rebate rate for HRC exporters from 13 percent to 8 percent have continued and have become more serious, though there has been no official announcement.
The tradable value for boron-added SS400 HRC from China has also increased, but just slightly - by $7.5/mt on average - from $630-645/mt FOB a week ago to $635-655/mt FOB, as steelmakers have been willing to bolster their prices ahead of the long holiday.
According to sources, the deal price level for ex-China SAE 1006 re-rolling grade HRC has touched $645/mt CFR Vietnam after a contract at $655/mt CFR early last week. The price level equals $635/mt FOB. Chinese prices are still the most competitive in the Vietnamese market, though most sellers have declined to give offers below $650/mt CFR to Vietnam lately.
“The extremely low offer prices of ex-China HRC have disappeared in the market amid the prevailing cautious sentiments, while some overseas buyers have concluded purchases for HRC ahead of the long holiday, bolstering ex-China HRC offer prices,” an international trader told SteelOrbis.
During the given week, HRC prices in the local market in China have declined amid the sluggish demand ahead of the Chinese New Year holiday (February 11-17). Some sellers chose to sell at lower prices, aiming to reduce inventory levels, while overall transaction activities have been quiet. Inventories are at relatively low levels, with some specifications in short supply.
Domestic HRC prices in China are at RMB 4,410-4,460/mt ($682-689/mt) ex-warehouse on February 2, with the average price level RMB 20/mt ($3.1/mt) lower as compared to January 26, according to SteelOrbis’ data. Compared with the price level on Monday, February 1, local quotations are RMB 10/mt ($3/mt) lower.
As of February 2, HRC futures at the Shanghai Futures Exchange are standing at RMB 4,307/mt ($666/mt), decreasing by RMB 121/mt ($18.7/mt) or 2.7 percent since January 26.
Additional pressure on ex-China HRC prices may come from falling raw material prices. For instance, iron ore 62 percent Fe prices in the spot market in China have lost $7.15/mt today and are down $15.15/mt over the past week, dropping below $150/mt CFR for the first time since early September 2020.
$1 = RMB 6.4736