Over the past month, ex-Japan HRC prices have posted a sharp drop, under pressure from the negative trend in the global market and increased allocations. While overall demand in Asia has not shown any visible improvement, suppliers have been focusing on sales to distant markets like Latin America. The outlook for December is less negative as supply volumes from Japan may decrease gradually, following better consumption in the local market.
Prices for ex-Japan SAE1006 2 mm HRC for the Asian region have tumbled to $840-860/mt CFR, down by $50-90/mt in slightly less than a month. The trading activity to the major outlets like Vietnam, Pakistan, and Bangladesh has been relatively weak. “The current price from Japan is around $800-810/mt FOB, but it might be lower in the near future in parallel with the latest market trend. Some customers, including re-rollers, are hesitating to do deals, as the market keeps dropping,” a Japanese trader said.
Having higher allocations for the spot market, Japanese mills have been more active in negotiations with distant markets. As a result, around 50,000-60,000 mt of ex-Japan HRC have been sold to Latin America. The price has been assessed at around $750/mt FOB or slightly above, taking into account the high freight. But a number of sources said that this price has been provided to customers to close a large volume at once.
At the same time, for other destinations, under no big inventory pressure Japanese mills have been asking for higher prices. For instance, in Europe, offers from Japan have been at €845-850/mt CFR or $956-962/mt CFR.
“As the basic situation in Japan, the supply and allocation gets tighter than before, since the demand for automotive has recovered to almost normal based on a positive forecast for securing semiconductors,” a Japanese source said. This means that Japanese HRC exporters are not expected to be too aggressive in December, though prices are likely to follow the trend in the global market.