Ex-China HRC market holds ground amid local support, but futures fail to recover

In the past week, ex-China HRC prices have remained relatively stable, supported by a modest upward trend in average domestic HRC prices in China, though futures prices have still failed to recover. Meanwhile, Chinese HRC export activity has remained subdued, as the ongoing market uncertainty continues to deter both traders and international buyers.

More specifically, export offers for boron-added SS400 HRC from most large Chinese mills have remained at $465-485/mt FOB, with a midpoint at $475/mt FOB. However, according to sources, deal prices from mills are still estimated by most market players at $465/mt FOB level. Offers from smaller mills have been voiced at $455-465/mt FOB.

Meanwhile, tradable prices for ex-China SS400/Q235 HRC have settled at $455-457/mt FOB, compared to $458-465/mt FOB at the beginning of last week. Offers for ex-China Q235 HRC 2,000 mm in Vietnam have been voiced at $468-471/mt CFR for July shipment, compared to $475-480/mt CFR at the beginning of last week.

At the same time, suppliers in the Middle East have reported most ex-China SS400 HRC offers at $490-495/mt CFR, the same as last week, though a number of traders have reported lower offer prices at $480-485/mt CFR levels as well. Furthermore, offers for ex-Turkey Q195 HRC have been estimated at $485-490/mt CFR, mainly the same as last week.

In the meantime, average HRC prices in the Chinese domestic market have edged up slightly compared to the previous week amid the positive signals at the macroeconomic level. Specifically, domestic HRC prices in China are at RMB 3,320-3,570/mt ($461-495/mt) ex-warehouse on May 20, with the average price level RMB 3/mt ($0.4/mt) higher compared to that recorded on May 13, according to SteelOrbis’ data.

On May 20, a new loan market quotation rate (LPR) was announced, while the LPR for five years or more fell by 10 basis points to 3.5 percent. The fall in the LPR will further reduce the cost of financing for enterprises and residents, which will boost market confidence, and support the stable growth of the real economy. The move in the LPR bolstered market sentiments in the HRC market to a certain degree. However, HRC futures prices have moved down as the traditional offseason is approaching, with slacker demand for HRC.

As of May 20, HRC futures at Shanghai Futures Exchange are standing at RMB 3,202/mt ($444/mt), decreasing by RMB 13/mt ($1.8/mt) or 0.4 percent since May 13, while down 0.37 percent compared to the previous trading day, May 13.

$1 = RMB 7.1931