Decline followed by upturn in Chinese HRC market

In the first half of the past week, the Chinese HRC market price posted a downward movement; however, with prices in the futures markets increasing, HRC prices in the main Chinese markets showed an obvious upward trend from May 24.

A wait-and-see mood currently prevails in China's HRC market, and the general transaction situation is less than satisfactory. With export order volumes declining recently, steelmakers are allocating more supplies to the domestic market. In the past week, HRC inventory in the main Chinese markets has indicated a small reduction, though time is needed to digest inventories. As for the market in the coming period, many traders lack confidence, while some are pessimistic.

During the past week, Chinese steelmakers mostly decreased their HRC prices. On May 18, Liuzhou Steel, Xinyu Iron and Steel Co., and Rizhao Steel decreased their HRC prices by RMB 250/mt ($37/mt), RMB 200/mt ($29/mt) and RMB 140/mt ($21/mt) respectively, with the respective ex-mill prices of these producers for Q235 5.75 mm HRC falling to RMB 5,140/mt ($754/mt), RMB 4,350/mt ($638/mt) and RMB 4,253/mt ($624/mt). All the above prices include 17 percent VAT.

Meanwhile, on May 21, HRC inventory in the Shanghai market stood at 1,695, 650 mt, down 2, 600 mt week on week.

The mainstream HRC prices from Chinese steelmakers are in the range of $650-670/mt FOB, with the mainstream export quotations from international trading companies at $620-650/mt FOB. The export prices are generally stable compared to last week, although the situation as regards booking volumes is not satisfactory.

Generally speaking, although in the latter part of this week, the market price has shown an upward trend, the international and domestic factors behind the downtrends in prices still exist, and the imbalance between supply and demand is still significant. Thus, it is expected there will be little room for price increases in the coming week, with the market most likely trending sideways.