Ex-China HRC prices relatively stable, upturn hampered by worse weather and slower local demand

Most big Chinese steel producers have kept prices mainly unchanged this week. The tradable level has been estimated at mainly the same level as well, though offers from some Chinese traders have continued to fluctuate, especially in Vietnam, with deal prices heard at different levels. However, although domestic HRC prices have moved up as compared to last week, they have started to be negatively impacted by the rainy weather and high temperatures in the country. 

At present, export offers for boron-added SS400 HRC given by major Chinese mills are at $550-575/mt FOB, with a midpoint at $562.5/mt FOB, the same as last week, while some offers from several big mills are still heard at as high as $590/mt FOB. “China is becoming tentative again. It is hard to predict where the trend will go in the next few weeks,” a market insider said. 

At the same time, the tradable level for ex-China SS400 HRC has been heard at $540-550/mt FOB on Tuesday, June 20, the same as last week. However, according to market insiders, following offers for ex-China SS400 HRC at $545/mt CFR Vietnam at the beginning of last week, several big deals were signed at around $555-560/mt CFR Vietnam at the end of last week, while this week a few batches have been sold in Vietnam at $548-550/mt CFR. At the same time, most offers for ex-China SS400 HRC have been reported at $550/mt CFR on Tuesday, June 20, with bids standing at $548/mt CFR level. 

Furthermore, another deal for 20,000 mt of ex-China SAE1006 HRC has been reported in Vietnam at $565/mt FOB, which corresponds to around $575/mt CFR. New offers, however, have been voiced at $580-585/mt CFR. 

Meanwhile, Chinese offers to other destinations have been relatively stable over the past week. In particular, offers to the Middle East have been voiced at $600/mt CFR, while ex-China Q195 offers in Turkey have been reported at $595/mt CFR, the same as last week. Besides, ex-China HRC offers in South America have been reported at $590-610/mt CFR Pacific coast, with a few deals reported at the higher end of the range this week. 

In the meantime, average HRC prices in the Chinese domestic market have moved up first, though they have started to indicate certain declines in some regions of China due to the widespread heavy rains and high temperatures since last weekend. Meanwhile, during the given week, HRC futures prices increased first as well, bolstering HRC prices to some extent, but the rainy weather in eastern China since last Saturday has exerted a negative impact on the demand for HRC. Meanwhile, the high temperatures have also weakened sentiments in the HRC market. However, in order to release liquidity, reduce the pressure from repayments and stimulate economic development, the People’s Bank of China (PBOC) has cut the one-year and five-year loan prime rates (LPR) by 10 basis points to 3.55 percent and 4.2 percent as of June 20, respectively, which will bolster sentiments among market participants. 

Domestic HRC prices in China are at RMB 3,860-4,020/mt ($539-561/mt) ex-warehouse on June 20, with the average price level RMB 54/mt ($7.5/mt) higher compared to that recorded on June 13, but down slightly by RMB 5/mt ($0.70/mt) from the previous day, according to SteelOrbis’ data. 

As of June 20, HRC futures at the Shanghai Futures Exchange are standing at RMB 3,836/mt ($536/mt), decreasing by RMB 12/mt ($1.7/mt) or 0.3 percent since June 13. 

$1 = RMB 7.1596