Ex-China HRC prices keep declining, but trend may reverse amid futures rise

Although HRC futures prices in China have shown some rebound on Tuesday, February 27, after the declines last week, Chinese HRC exporters, including both mills and traders, have remained rather negative in terms of prices “at least for now” as demand has remained sluggish in the main trade destinations.

More specifically, export offers for boron-added SS400 HRC given by major Chinese mills have settled at $565-585/mt FOB, with a midpoint at $575/mt FOB, down by $15/mt week on week. “Some mills are still offering at $580-585/mt FOB, like Shangang Rizhao, while some have decreased their offers, including Shagang to $565/mt FOB and Baoutou to $570/mt FOB,” a market insider told SteelOrbis.

Meanwhile, the tradable level for SS400 HRC from Chinese suppliers has been estimated at $540-550/mt FOB, against $545-560/mt FOB at the beginning of last week. According to sources, offers for ex-China SS400 HRC in Vietnam have been heard at $550-555/mt CFR, down by $5/mt week on week, while offers for Q195 HRC have stood at $545-548/mt CFR level, following several deals signed a few days ago at $538-545/mt CFR. Besides, most offers for ex-China Q195 HRC in Pakistan have been voiced at $555/mt CFR. However, according to traders, some bookings were reported at as low as $545/mt CFR later at the end of last week.

Offers for Q195/SS400 HRC in the Middle East have been heard at $590-600/mt CFR, mainly the same as last week. At the same time, ex-China offers in Turkey have been voiced at $580-590 CFR from non-VAT traders mainly, down by $5-15/mt week on week.

“As futures have rebounded today, there is some hope the trend will reverse, and many people are bullish for the Chinese market in March and April, as well as for a demand recovery in Asia amid a revival of construction,” a Chinese trader said.

Meanwhile despite some rebound in HRC futures prices reported today, February 27, average HRC prices in the Chinese domestic market have moved down over the past week as demand from downstream users has not seen a significant improvement yet following the long holiday. Specifically, domestic HRC prices in China have settled at RMB 4,010-4,140/mt ($565-583/mt) ex-warehouse on February 27, with the average price level RMB 40/mt ($5.6/mt) lower compared to that recorded on February 20, and the same as compared to yesterday, according to SteelOrbis’ data. 

Demand for HRC has remained slack as a wave of cold weather has hit China, which has exerted a negative impact on market sentiments. Inventory of HRC has been at relatively high levels, also negatively affecting prices. The contrast between supply and demand in the HRC market was not prominent amid the slow release of production capacity. On February 27, following continuous declines, HRC futures prices finally indicated a rise of 1.42 percent compared to the previous trading day, signaling an improvement in market sentiments.

As of February 27, HRC futures at the Shanghai Futures Exchange are standing at RMB 3,937/mt ($547/mt), increasing by RMB 53/mt ($11.7/mt) or 1.4 percent since February 20, though rising by 1.42 percent compared to the previous trading day (February 26).

$1 = RMB 7.1057