Ex-China HRC prices keep falling sharply amid weak support from local and overseas markets

Following a drop in ex-China HRC quotations last week, this week has brought another fall in offers following the decreases in futures and local HRC prices in China. However, despite Chinese sellers’ readiness to provide significant discounts, trading activity has remained muted due to relatively sluggish demand in most main destinations.

At present, export offers for boron-added SS400 HRC given by major Chinese mills are at $630-660/mt FOB mainly for June shipment, with a midpoint at $645/mt FOB, down by $20/mt week on week. At the same time, according to sources, smaller mills have been offering at around $615-620/mt FOB, while offers from Anfeng Steel have dropped to around $590/mt FOB, or $600/mt CFR in Vietnam. “Such mills as Shagang and Shandong have been offering at $640/mt FOB, Benxi Steel at $660/mt FOB, while Rizhao has lowered its price to $630/mt FOB,” a market insider said.

Meanwhile, the tradable level for SS400 HRC has dropped to $585-620/mt FOB, down by $20-25/mt week on week and versus $600-635/mt FOB at the end of last week. The lower end of the range corresponds to offers in Vietnam, coming at $595-600/mt CFR, versus $620/mt CFR at the beginning of last week and down by $10-15/mt since Friday, March 7. “We heard that several deals have been signed with Vietnamese buyers at $600/mt CFR already, but more drops are still awaited,” a Chinese trader told SteelOrbis. Besides, ex-China SAE1006 HRC offers from traders to Vietnam have been voiced at around $640-650/mt CFR, compared to $660/mt CFR at the end of last week. Furthermore, Chinese traders have been offering their SS400 HRC to Pakistan at around $625/mt CFR, down by $20/mt week on week.

At the same time, Chinese suppliers have also continued to decrease their offers for higher-priced destinations, though trade has remained slow. In particular, offers for ex-China Q195 HRC have been voiced in Turkey at $655-660/mt CFR, down by $20-25/mt week on week, while offers to the Middle East, the UAE in particular, have been reported at $650-670/mt CFR, compared to $680-685/mt CFR last week. According to sources, only occasional deals have been reported this week, while in general trade has remained limited given the continuous drops in prices, which makes buyers wait for further decreases. Besides, the stable higher levels of buyers’ stocks in Turkey along with lower end-user demand exert more pressure on trade, while some market insiders assume $650/mt CFR may be a workable price level for several buyers.

Meanwhile, during the given week, HRC futures prices at Shanghai Futures Exchange (SHFE) have moved down, negatively affecting HRC prices in the spot market. In March, demand had been improving, while HRC producers’ capacity utilization rates were at a relatively stable level, which contributed to the declining inventory levels. However, entering April, HRC producers increased their capacity utilization rates, while demand has not followed up at the same speed, resulting in increasing inventory levels and exerting a negative impact on the HRC market. Market players expect better demand in the near future, though more time is needed for this to be confirmed.

Domestic HRC prices in China are at RMB 4,210-4,300/mt ($611-624/mt) ex-warehouse on April 11, with the average price level RMB 77/mt ($5.3/mt) lower compared to that recorded on April 4, according to SteelOrbis’ data.

As of April 11, HRC futures at the Shanghai Futures Exchange are standing at RMB 4,029/mt ($585/mt), decreasing by RMB 107/mt ($15.5/mt) or 2.6 percent since April 4.

  $1 = RMB 6.8882