Ex-China HRC prices mainly stable, lower futures and weak demand weigh on mood

Ex-China HRC export prices have remained relatively stable over the past week, although lower HRC futures prices have added mild downward pressure. Export offers have generally stayed firm despite subdued demand, as sellers continue to test buying interest both domestically and overseas ahead of the Lunar New Year holiday, with shipment scheduling and delivery adjustments ongoing. In the domestic market, prices have edged down only slightly, though a fresh wave of cold weather across parts of China is expected to weigh on HRC demand.

Specifically, the price range for boron-added SS400 HRC from large Chinese mills has been estimated at $470-485/mt FOB, compared to $475-480/mt FOB last week, though with a midpoint at $477.5/mt FOB, the same as last week. However, offers from smaller private mills have been voiced mainly at $465-475/mt CFR, versus $470-475/mt FOB last week, though their business activity is still paused as most of these mills had previously been selling material without VAT.

At the same time, offers from Chinese traders have been voiced at $460-470/mt FOB, the same as last week, with occasional deal prices voiced mainly at $460-465/mt FOB levels, according to sources. In particular, ex-China 2,000 mm Q235 HRC offers in Vietnam have been voiced at around $485/mt CFR, for late February shipment, the same as last week. 

Meanwhile, Chinese offers for SS400 HRC to other destinations like the Middle East have settled at around $500-505/mt CFR UAE, depending on the supplier, the same as last week.

In addition, Chinese Q195 HRC offers to Turkey have been estimated at $500-505/mt CFR for February shipment, the same as last week, and following a deal for 50,000 mt of SAE1006 material signed at $497/mt CFR last week.

“The Chinese steel market has entered a phase of adjustment, with overall sentiment remaining relatively stable. After gold once again broke a historic record, steel prices have faced pressure from persistently weak downstream demand, leading to a decline of around one percent,” a market insider told SteelOrbis.

In the meantime, average HRC prices in the Chinese domestic market have edged down slightly compared to the previous week amid the decreasing HRC futures prices. Domestic HRC prices in China have settled at RMB 3,310-3,410/mt ($473-487/mt) ex-warehouse on January 20, with the average price level RMB 3/mt ($0.4/mt) lower compared to that recorded on January 13, according to SteelOrbis’ data.

During the given week, HRC futures prices have moved down, exerting a negative impact on market sentiments, weakening the support to the prices in spot market. Although the PBOC has announced interest rate cuts for various structural monetary policy tools by 0.25 percentage points, with one-year re-lending rates for various categories reduced to 1.25 percent, market sentiments gradually cooled down, signalling the prevailing cautious attitude as regards the future prospects for the HRC market. BHP stated that it would accept the decline in iron ore prices during the yearly-contract negotiation with China, which will negatively affect HRC prices from cost side. Moreover, a round of cold weather has been hitting China, which will slacken the demand for HRC.

“Early maintenance programs and holiday preparations at some mills have limited immediate supply-side pressure, while the ongoing rise in social inventories is largely viewed as seasonal,” a market insider said.

As of January 20, HRC futures at Shanghai Futures Exchange are standing at RMB 3,276/mt ($468/mt), decreasing by RMB 27/mt ($3.9/mt) or 0.8 percent since January 13, while decreasing by 0.97 percent compared to the previous trading day, January 19.

$1 = RMB 7.0006