Ex-China HRC prices stronger amid futures recovery, customers not in a hurry to accept

Following a continuous recovery in futures prices since last week together with stronger domestic prices, Chinese HRC mills have decided to increase their export offers this week. Offers from traders have increased as well, though the tradable level has remained lower than mills’ official offers, while trade has been very weak as many customers do not believe in a strong uptrend for now.  

More specifically, export offers for boron-added SS400 HRC from large major Chinese mills are at $560-590/mt FOB, with a midpoint at $575/mt FOB, up by $22.5/mt week on week. “Apart from Benxi’s offers which have remained at $590/mt FOB, Yanshan Steel has also increased its prices to $590/mt FOB, which is still unworkable, while others like Baotou Steel have decided to increase offers to $560/mt FOB, from $540/mt FOB. Offers from Shagang and Anshan are at $570/mt FOB, and Rizhao has settled its offers at $560/mt FOB,” a market insider told SteelOrbis.    

“The fact is that Chinese mills have increased their offers, but the question is who can really sell and buy at this level,” another source said.   

At the same time, the tradable level for Chinese SS400 HRC has increased as well, standing at around $540-550/mt FOB, up by $15-20/mt over the past week. In particular, offers for ex-China SS400 HRC from traders in Vietnam have been voiced at $555-565/mt CFR, versus $530/mt CFR at the beginning of last week and up by $10/mt since the end of last week. Meanwhile, ex-China Q195 HRC offers in Turkey have settled at around $590/mt CFR, up by $15-25/mt week on week, while offers in the Middle East, the UAE in particular, have been reported at around $595-600/mt CFR, compared to $570-580/mt CFR last week.   

In the SAE1006 HRC segment, Chinese suppliers have increased their offers to Vietnamese buyers by around $10/mt since the end of last week to $585-590/mt CFR. Though this level is considered too high to be accepted, especially given the fact that local Vietnamese producer Hoa Phat Group has officially dropped its new offers for domestic customers to $570-572/mt CIF, down by around $40/mt month on month.   

“I don’t think ex-China HRC prices will recover a lot in June, but we need to see how strong the governmental policy is going to be,” a Chinese trader said.  

During the given period, two of China’s big steelmaking cities in Hebei Province - Tangshan and Qinghuangdao - have implemented production cuts, bolstering market players’ sentiments and resulting in rises in HRC prices. However, demand for HRC has not seen significant improvements in the local market, signaling that the gap between supply and demand is unlikely to be closed in the short term, which will exert a negative impact on the HRC market. Iron ore prices have moved up recently, providing support for HRC prices from the cost side. Currently, the inventory of HRC is at a relatively low level, also positively affecting prices, though the coming rainy season and high temperatures will reduce demand. It is thought that HRC prices in the Chinese domestic market will fluctuate within a limited range in the coming week.   

Domestic HRC prices in China are at RMB 3,790-3,980/mt ($534-561/mt) ex-warehouse on June 6, with the average price level RMB 93/mt ($13.1/mt) higher compared to that recorded on May 30, according to SteelOrbis’ data.   

As of June 6, HRC futures at the Shanghai Futures Exchange are standing at RMB 3,765/mt ($530.3/mt), increasing by RMB 193/mt ($27.2/mt) or 5.4 percent since May 30.   

$1 = RMB 7.1075