Ex-China HRC offers rise amid stronger futures prices, demand still an issue

Ex-China HRC offer prices have edged up over the past week amid signs of a rebounding trend in the local and futures markets given the announcement of a cut in the reserve requirement ratio for banks at the end of last week. However, the trade activity of Chinese exporters has remained limited given tough competition with other suppliers, from Asia in particular. Furthermore, a strong fundamental improvement is still doubtful as, according to market insiders, local and overseas demand is likely to remain weak, with no improvement in supply and demand seen in China due to the traditional lull during the winter season coupled with more Covid-19 restrictions.

At present, export offers for boron-added SS400 HRC given by major Chinese mills are at $540-560/mt FOB for January and February shipments, with a midpoint at $550/mt FOB, up by $10/mt week on week. “While Chinese mills and traders have been increasing their offers, most buyers’ bids have remined $10-30/mt lower, depending on the destination. Besides, other suppliers from Asia can give more attractive prices, like those from Vietnam, Japan, etc.,” a market insider told SteelOrbis.

Meanwhile, Chinese traders have decided to go higher as well, pushing the tradable level for ex-China SS400 HRC to around $535-550/mt FOB, up by $10-20/mt week on week. As a result, ex-China SS400 HRC offers to Vietnam have settled at $545-550/mt CFR, up by $5-10/mt over the past week, but with buyers’ bids still coming at $540/mt CFR, according to sources. Besides, after several deals for ex-China SS400 HRC sold in short position at $560/mt CFR Pakistan, new offers have been heard at around $580/mt CFR Karachi. “We heard rumors that these were Russian-origin materials sold to Pakistan,” a market participant said. Also, to the Middle East, the UAE in particular, Chinese suppliers have been offering SS400 HRC at $585/mt CFR, up by $10/mt from the lower end of the range week on week.

In the SAE1006 HRC segment, China has remained less competitive than for SS400, given tough competition with other Asian suppliers. Ex-China HRC offers have been voiced at $570/mt CFR Vietnam, versus $560-565/mt CFR last week. Offers to Turkey have been reported at $590-600/mt CFR, compared to $570-580/mt CFR last week, while offers for ex-China SEA1006 HRC have been heard at $600-620/mt CFR UAE for late January-early February shipments, which are considered to be “overpriced” given the ex-Japanese offers at $580/mt CFR.

During the given week, HRC prices in the Chinese domestic market have edged up amid the increasing trend of HRC futures prices. However, cautious sentiments have started to prevail among market players due to the cold weather hitting China. Besides, the continuous outbreaks of the Covid-19 pandemic and strict control measures in many regions of the country will reduce the demand for HRC, according to sources. However, coke prices have edged up, which will increase the production costs of HRC and exert a negative impact on steelmakers’ profitability. It is expected 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 3,810-3,980/mt ($529-553/mt) ex-warehouse on November 29, with the average price level RMB 60/mt ($8.3/mt) higher than that recorded on November 22, according to SteelOrbis’ data.

As of November 29, HRC futures at the Shanghai Futures Exchange are standing at RMB 3,880/mt ($539/mt), increasing by RMB 125/mt ($17.4/mt) or 3.3 percent since November 22.

$1 = RMB 7.1989