Ex-China HRC offers increase from big mills amid high coke prices and lower output, weak demand persists

Some large Chinese mills have been attempting HRC price increases this week, saying that the costs of production are on the higher side due to expensive local coke and that steel output in China has been falling. But the low prices from small mills and traders are still seen in the market as weak demand conditions have only been aggravated.

Large Chinese mills have been offering boron-added SS400 HRC mainly at $505-510/mt FOB at the beginning of this week, which is a rise by $6/mt since late last week and by $5/mt compared to June 30. Some big producers have been targeting $510-515/mt FOB, but for now this increase has been very shaky as generally demand has been weak and has even worsened further in the local market. But since the tenth round of local coke price increases in China has been under discussion, this has been putting pressure on mills’ margin and has supported steel prices from the cost side. “Last week’s average daily hot metal output decreased by 47,000 tons month on month… Going forward, under expectations of narrowing profit margins and increased environmental protection measures, hot metal output is still expected to follow a downward trend. The pace of the decline has been faster than market expectations,” a Chinese source noted, commenting on the halting of the price decline and attempts by some mills to increase offers.

The price level for small mills and traders has not changed much, being at $487-490/mt FOB on July 7, which is $0.5/mt higher on average from what was seen in the market late last week, but still $2-3/mt down from a week ago. The lower end of this range corresponds to Anfeng’s prices, but a few Chinese sources said that they expect prices to be not below $490/mt FOB in the near future. The latest deal price levels for Q195 HRC in Pakistan were at $512-513/mt CFR and now offers are assessed at $515/mt CFR. The indicative price for Chinese SS400 has added $5/mt over the past week to $510-515/mt CFR.

During the given week, frequent occurrences of catastrophic weather, for instance, a tornado in Hubei Province, floods in Guangxi Province and short-term severe convective weather in several provinces in eastern China have exerted a negative impact on the local Chinese HRC market. Following the plum rainy season, extremely high temperatures are going to hit eastern China, resulting in prevailing bearish sentiments among market players. There was no large-scale stock replenishment, which will negatively affect domestic HRC prices in the near future. However, the increasing coke prices have bolstered HRC firmly from the cost side. It is thought that HRC prices in the Chinese domestic market will likely fluctuate within a limited range in the coming week.

Domestic HRC prices in China are at RMB 3,340-3,470/mt ($490-509.5/mt) ex-warehouse on July 7, with the average price level RMB 20/mt ($2.9/mt) lower compared to that recorded on June 30, according to SteelOrbis’ data. 

As of July 7, HRC futures at Shanghai Futures Exchange are standing at RMB 3,283/mt ($482/mt), decreasing by RMB 32/mt ($4.7/mt) or 1.0 percent since June 30, while decreasing by 0.21 percent compared to the previous trading day, July 6.

 $1 = RMB 6.8054