Ex-China HRC prices from mills stable, mood among traders improves amid futures recovery

This week, even though local HRC prices in China have declined, prices on dollar basis have remained relatively stable given the appreciation of the Chinese currency against the US dollar, while better sentiments have been mounting among Chinese HRC exporters, traders and small mills, especially due to higher HRC futures prices. However, most Chinese mills have kept their offers fairly stable over the past week.

Specifically, offers from big Chinese mills for boron-added SS400 HRC have stayed at $495-505/mt FOB, with a midpoint at $500/mt FOB, the same as last week, while a number of large mills have been officially offering their materials at around $515-520/mt FOB. Meanwhile, offers from smaller mills have been voiced at $490/mt FOB, against $480-490/mt FOB last week.

At the same time, offers from Chinese traders have returned to the levels reported two weeks ago, at $485-500/mt FOB, up by $10-12/mt week on week. According to sources, this week sizable lots for ex-China SS400 from one of the major steel mills have been sold to Vietnam, Pakistan and the Middle East at $485/mt FOB.

Offers for ex-China Q235/SS400 HRC have been voiced at $500/mt CFR for September shipment, up by $10/mt over the past week, while offers for SAE1006 HRC have settled at $510-515/mt CFR for September-October shipment, against $506-510/mt CFR last week.

Furthermore, following deal prices for ex-China Q195 HRC at $520-525/mt CFR Turkey last week, this week most of the large traders are offering Chinese Q195 HRC to Turkey at $533-535/mt CFR for 40,000-45,000 mt lots, while $530/mt CFR is also considered possible. Besides, according to customers in the Middle East, the UAE in particular, most ex-China SS400 HRC offers have been heard at $530-540/mt CFR, versus $530-535/mt CFR last week.

Meanwhile, average HRC prices in the Chinese domestic market have seen slight declines amid the slack demand from downstream users. Domestic HRC prices in China have settled at RMB 3,500-3,590/mt ($491-503.5/mt) ex-warehouse on August 6, with the average price level RMB 3/mt ($0.4/mt) lower compared to that recorded on July 30, according to SteelOrbis’ data.

During the given week, the demand for HRC has remained slack, while steelmakers have implemented maintenance works to reduce output and bolster prices. Inventory of HRC has decreased gradually, exerting a positive impact on market sentiments. However, the hot weather conditions have continued, negatively affecting the HRC market. At the same time, this week the Chinese yuan has risen to its strongest level in five months, partly due to the domestic economic recovery as well as continued capital inflows. China's economy grew 3.2 percent year on year in the second quarter, following a 6.8-percent contraction in the first quarter, according to the National Bureau of Statistics (NBS).

As of August 6, HRC futures at Shanghai Futures Exchange are standing at RMB 3,487/mt ($489/mt), increasing by RMB 39/mt ($5.5/mt) or 1.1 percent since July 30, while down 0.97 percent compared to the previous trading day, August 5.

$1 = RMB 7.1318