Ex-China HRC prices fall amid low demand, small mills and traders drop prices below $500/mt FOB

Weak local demand and high supply have been putting pressure on ex-China HRC prices this week, in line with most market sources’ expectations. Even though there are still limited or almost no non-VAT HRC offers from China, small mills and traders have cut offers to below $500/mt FOB, trying to accelerate sales.

The prices for boron-added SS400 HRC from large Chinese mills have been at $507-510/mt FOB for late August-September shipment, decreasing by $7/mt on average from last week’s $515-516/mt FOB. Some big mills have managed to sell at $508/mt FOB, and, though the destination is unknown at the time of publication, market sources agree that it should be for the MENA region. This is in line with expectations as this has been assessed as a “normal” discounted price in the current weak demand situation.

At the same time, the offer price from Anfeng, which usually gives the most competitive price, has been at $494/mt FOB, losing $7/mt over the past week. The general price level for small mills and traders has settled at $493-498/mt FOB, down by $6/mt from last week. All the offers mentioned above are inclusive of VAT, while non-VAT offers are still limited. “I think they [non-VAT HRC prices] should be at $488/mt FOB,” one of the Chinese sources said. But “currently only Bayuquan port and Lianyungang port are open for non-VAT operations, other loading ports cannot allow it. But Bayuquan and Lianyungang are not 100 percdent safe for non-VAT either,” a large Chinese trader said.

Among Asian buyers some limited demand has been seen only in Pakistan, with some deals rumored at $520-523/mt CFR for Q195/SS400, versus previous deals to the same destination at $525-530/mt CFR. Even though demand in Pakistan itself is not strong, “This is maybe the rare market where some buying is happening, unlike Vietnam,” an Asian trader said. Ex-China SS400 HRC in Vietnam has been assessed at $520/mt CFR, but for Q195 the market is waiting for prices not above $505-508/mt CFR.

For Turkey, the latest Chinese offers are at $545-548/mt CFR, while last week they were voiced at $555/mt CFR and above.

In the local Chinese HRC market, the widespread rainy weather has negatively affected the demand for HRC from downstream users, weakening prices to a certain degree. Firm coking coal and coke prices have bolstered HRC prices from the cost side, but iron ore has continued to soften, so it has partially offset the higher costs of other raw materials. Sellers have chosen to sell at lower prices, aiming to bring in cash and reduce inventories. It is thought that HRC prices in the Chinese domestic market will likely soften further in the coming week.

Domestic HRC prices in China are at RMB 3,390-3,500/mt ($497-513/mt) ex-warehouse on June 23, with the average price level RMB 33/mt ($4.8/mt) lower compared to that recorded on June 16, according to SteelOrbis’ data. 

As of June 23, HRC futures at Shanghai Futures Exchange are standing at RMB 3,327/mt ($497/mt), decreasing by RMB 55/mt ($8.1/mt) or 1.6 percent since June 16, while decreasing by 0.27 percent compared to the previous trading day, June 22. 

$1 = RMB 6.8171