Ex-China HRC offers surge amid higher local and futures prices, but buyers cautious

Export activity for Chinese hot rolled coil (HRC) has rather remained sluggish over the past week, as recent sharp price increases, a clouded market outlook, and persistently weak demand have continued to dampen buying interest from overseas customers. At the same time, many foreign buyers have opted to stay on the sidelines, adopting a cautious, wait-and-see approach amid the prevailing market uncertainty. 

Specifically, export offers for boron-added SS400 HRC from large Chinese mills have moved to $460-470/mt FOB, with a midpoint at $465/mt FOB, up by $7.5/mt week on week. Meanwhile, smaller mills have been offering their HRC at around $455-460/mt FOB, compared to 450/mt FOB last week, though occasional offers from small non-VAT Chinese mills are still voiced at lower levels of around $445-455/mt FOB, versus $440/mt FOB last week, according to sources.

In the meantime, the tradable price for ex-China SS400/Q235 HRC has been estimated at $452-458/mt FOB, compared to $445-450/mt FOB at the beginning of last week. In particular, following several deals for at least 40,000 mt in total of ex-China SS400 HRC sold in the UAE at $470-478/mt CFR last week, this week most offers have been voiced at $485-495/mt CFR, for September and October shipment. Besides, most offers for ex-China Q195 HRC in Turkey have been voiced at $490-495/mt CFR level, up by $5-10/mt week on week.

Meanwhile, offers for ex-China Q235 HRC in Vietnam have settled at around $463-465/mt CFR against deal prices at $457-458/mt CFR last week.

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 3,320-3,580/mt ($464-501/mt) ex-warehouse on July 16, with the average price level RMB 73/mt ($10.2/mt) higher compared to that recorded on July 9, according to SteelOrbis’ data. 

Notably, HRC futures prices moved up in the first part of the given week, bolstering prices in the spot market. Meanwhile, coke prices have moved up, providing support to HRC prices from the cost side. However, the high temperatures in most regions of China have been exerting a negative impact on market sentiments. Downstream users have been unwilling to build up stocks of HRC and some traders have chosen to reduce the stock levels, aiming to avoid potential risks. It is thought that HRC prices in the Chinese domestic market will likely move sideways in the coming week.

As of July 16, HRC futures at Shanghai Futures Exchange are standing at RMB 3,253/mt ($455/mt), increasing by RMB 63/mt ($8.8/mt) or 2.0 percent since July 9, while decreasing by 0.31 percent compared to the previous trading day, July 15.     

$1 = RMB 7.1534