Ex-China HRC prices weaken amid worse sentiment, customers expect more discounts

This week Chinese HRC suppliers have returned from their long holiday, decreasing their offers for SS400 HRC by around 15/mt over the past two weeks given no visible support from futures and local HRC prices and increasing inventories in China. However, despite the price drop, most buyers have been holding back from new purchases so far, bidding at lower levels instead.

More specifically, export offers for boron-added SS400 HRC from large Chinese mills have settled at $540-545/mt FOB, with the midpoint at $542.5/mt FOB, down by $15/mt over the past two weeks. “All mills have dropped their offers, and among large mills, Shagang and Baotou are offering at $545/mt FOB, while Rizhao is at $540/mt FOB,” a market insider told SteelOrbis.

Meanwhile, the tradable SS400 HRC prices have been voiced at $515-540/mt FOB, depending on the destination, versus $530-550/mt FOB before the holiday, though most customers believe deals will be signed at levels not higher than $530/mt FOB. Offers for ex-China Q195 HRC in Vietnam have been voiced at $520/mt CFR, versus $525-530/mt yesterday and down by $10-20/mt over the past two weeks, while offers for SS400 HRC have been reported at $525-530/mt CFR, down by $15/mt.  “We heard there was a deal for SS400 HRC at $530/mt CFR Vietnam on Monday, October 9, but now we expect new deals to be signed at below $520/mt CFR,” a Vietnamese trader told SteelOrbis, adding, “Such low offers are obviously coming from non-VAT Chinese traders.”

Ex-China SS400 and Q195 HRC offers in Pakistan have been voiced at $540/mt CFR for November shipment, down by $15/mt over the past two weeks, with a deal for 2,000 mt reported to have been signed at the above-mentioned level.

Furthermore, Chinese HRC offers in the Middle East have been reported at around at $580/mt CFR UAE, but customers’ bids are at $570/mt CFR.

In the meantime, average HRC prices in the Chinese domestic market have moved on a downtrend amid increasing supply and inventory levels. Specifically, domestic HRC prices in China are at RMB 3,890-3,940/mt ($542-549/mt) ex-warehouse on October 10, with the average price level RMB 63/mt ($8.8/mt) lower compared to September 26, according to SteelOrbis’ data.

According to sources, during the given week, the supply of HRC has been at relatively high levels and will likely see an increasing trend, which will exert a negative impact on prices. Following the long National Day holiday, HRC producers have sped up the deliveries to the market. At the same time, HRC futures prices have moved on a downtrend, negatively affecting the prices in the spot market. It is thought that HRC prices in the Chinese domestic market will likely edge down in the coming week. 

As of October 10, HRC futures at the Shanghai Futures Exchange are standing at RMB 3,715/mt ($517/mt), decreasing by RMB 44/mt ($6.1/mt) or down by 1.2 percent since September 26. 

$1 = RMB 7.1781