Ex-China HRC offers move up, but exports quiet and optimism fading

A slight increase in ex-China HRC offers has been observed this week, supported by the modest rebound in HRC futures prices seen last week. However, most Chinese HRC suppliers have remained quiet in terms of export sales. At the same time, initial optimism over potential steel production cuts - driven by anti-smog restrictions in Tangshan and Beijing’s renewed push to curb excessive competition and eliminate outdated capacity - has begun to fade, after supporting Chinese HRC prices last week.

More specifically, market speculation surfaced early last week that mills in Tangshan were instructed to reduce operations and cut sintering capacity by 30 percent from July 4 through the end of the month, as part of efforts to improve air quality. As a result, export offers for boron-added SS400 HRC from large Chinese mills have moved to $450-465/mt FOB, with a midpoint at $457.5/mt FOB, up by $5/mt week on week. Meanwhile, smaller mills have been offering their HRC at around $450/mt FOB, compared to $445/mt FOB last week, though occasional offers from small non-VAT Chinese mills are still voiced at $440/mt FOB level, according to sources.

In the meantime, the tradable price for ex-China SS400/Q235 HRC has been estimated at $445-450/mt FOB, compared to $430-445/mt FOB at the beginning of last week. In particular, ex-China SS400 HRC offers from non-VAT traders in the UAE have been reported at $460-465/mt CFR, down from $465/mt CFR last week, while offers from other traders and mills have been estimated at $470-480/mt CFR, the same as last week.

Besides, most offers for ex-China Q195 HRC in Turkey have been voiced at $480-490/mt CFR, the same as at the end of last week, but lower offers from non-VAT suppliers have also been voiced, at around $470-475/mt CFR, up by $5/mt week on week. 

Meanwhile, offers for ex-China Q235 HRC in Vietnam have settled at around $457-458/mt CFR, against $452/mt CFR at the beginning of last week, while bids have been reported at $455/mt CFR, up by $5/mt week on week.

“Chinese HRC prices gained support on expectations of supply cuts, but the momentum has started to fade amid weak demand. However, price declines are unlikely ahead of the upcoming Politburo meeting,” a market insider told SteelOrbis.

In the meantime, average HRC prices in the Chinese domestic market have moved up compared to the previous week amid increasing HRC futures prices. In particular, domestic HRC prices in China have settled at RMB 3,260-3,510/mt ($456-491/mt) ex-warehouse on July 8, with the average price level RMB 37/mt ($5.2/mt) higher compared to that recorded on July 1, according to SteelOrbis’ data. 

During the given week, Tanghshan’s production cuts for environmental protection reasons bolstered market sentiments and exerted a positive impact on HRC prices. Moreover, the production cuts will continue ahead of September 3, the 80th anniversary of the victory of the Chinese People's War of Resistance against Japan and the World Anti-Fascist War, which will ease the pressure from the supply side. However, there has been more negative news affecting market sentiments, including US President Trump’s announcement of the imposition of tariffs on several countries, and Vietnam imposing antidumping tariffs on Chinese HRC, lasting for five years, which will weaken the support for HRC prices soon.

As of July 8, HRC futures at Shanghai Futures Exchange are standing at RMB 3,191/mt ($438/mt), increasing by RMB 55/mt ($7.7/mt) or 1.75 percent since July 1, while decreasing by 0.06 percent compared to the previous trading day, July 7. 

$1 = RMB 7.1534