Ex-China HRC prices weaken after sharp drops in futures prices before long holiday

Export offers for Chinese HRC both from traders and big mills have shown a slight decrease this week given the sluggish demand ahead of the eight-day public holiday (September 29-October 6), the further drops in HRC futures prices and the continually increasing carbon steel production in the country.

More specifically, export offers for boron-added SS400 HRC from large Chinese mills have settled at $550-565/mt FOB, with a midpoint at $557.5/mt FOB, down by $5/mt week on week. Such a decline is mainly explained by the decrease in HRC futures prices caused partially by concerns over steel demand and the almost finished pre-holiday restocking of raw materials and finished steel, including flat products. “Many people have concerns over the future demand recovery in China given that restocking has been rather slow ahead of the holidays,” the representative of a mill told SteelOrbis.

Meanwhile, the tradable level for SS400 HRC, which increased at the beginning of last week, and dropped by $10/mt to $535-550/mt FOB by the end of last week, by Tuesday, September 26, has been estimated at $530-550/mt FOB. However, according to sources, most bids from customers, especially those from Asia, have been voiced at $520-525/mt FOB. In particular, at the end of last week, an ex-China deal for 10,000 mt of SS400 was reported at $540/mt CFR Vietnam, while, according to sources, new bids have been voiced at as low as $530/mt CFR this week. Another deal for 10,000 mt of ex-China SS400 has been reported at $540/mt CFR in South Korea.

Furthermore, ex-China offers in the Middle East and Turkey have been reported at $570-580/mt CFR, following several deals at around $585/mt CFR UAE last week.

In the meantime, during the given week, HRC producers have been unwilling to reduce outputs, resulting in pressures from the supply side. At the same time, inventory levels of HRC have indicated an increasing trend, exerting a negative impact on prices. Moreover, HRC futures prices have indicated a decreasing trend, negatively affecting HRC prices in the spot market. Furthermore, traders have been cautious in building up stocks ahead of the long National Day holiday (September 29-October 6).

Domestic HRC prices in China are at RMB 3,960-3,980/mt ($552-555/mt) ex-warehouse on September 26, with the average price level RMB 110/mt ($15.3/mt) lower compared to September 19, according to SteelOrbis’ data.

As of September 26, HRC futures at the Shanghai Futures Exchange are standing at RMB 3,759/mt ($524/mt), decreasing by RMB 174/mt ($24.3/mt) or down by 4.4 percent since September 19.

$1 = RMB 7.1727