Excitement over ex-China HRC prices starts to die down amid futures slump

The upward surge in the ex-China HRC market which has been observed throughout November has started to ease this week given the unexpected slump in HRC futures prices and consequently the declines seen in local HRC prices in China. Thus, although big mills have kept their HRC export prices stable at high levels, some traders have decided to go lower in their new offers.

At present, export offers for boron-added SS400 HRC have remained at $570-580/mt FOB, for January and also February shipments, with the midpoint at $575/mt FOB, the same as on Friday, November 24, and up by $2.5/mt on average week on week. “Rizhao keeps offering at $570/mt FOB, while Shangang offers at $575/mt FOB, as well as others at $570-580/mt FOB, but sentiments have worsened amid the recent drops in futures,” a market insider told SteelOrbis.

Meanwhile, this week several traders and smaller mills have started to reduce their offers to $550/mt FOB from $550-565/mt FOB. At the same time, according to sources, Chinese suppliers have managed to secure several orders in the Middle East and Vietnam given the turbulence which appeared in the futures market. More specifically, at least 10,000 mt of ex-China SS400 HRC were sold in the UAE at $590-595/mt CFR at the end of last week and beginning of this week. Besides, Chinese traders are reported to have sold around 10,000 mt of Q235/SS400 HRC in Vietnam at $557-560/mt CFR this week.

Furthermore, more deals for SAE1006 HRC have been reported as well, with a few batches for 15,000 mt in total reported to have been sold at $610/mt CFR on average in the UAE. Besides, following a deal for around 30,000 mt of ex-China SAE1006 HRC at $578/mt CFR Vietnam last week, around 6,000 mt of Q355 HRC have been sold at $575-578/mt CFR this week, though most SAE1006 HRC offers have remained at $580/mt CFR so far.

In the meantime, average HRC prices in the Chinese domestic market have indicated declines amid the cautious sentiments among market players and declining HRC futures prices. In particular, domestic HRC prices in China are at RMB 4,090-4,160/mt ($575-585/mt) ex-warehouse on November 28, with the average price level RMB 97/mt ($14/mt) lower compared to that recorded on November 21, according to SteelOrbis’ data.

During the given week, demand for HRC has been quite firm, resulting in decent inventory consumption rates. However, some traders have started to be cautious as regards the future prospects for the HRC market, which may exert a negative impact on prices in the near future. At the same time, several government departments requested relevant enterprises in the iron ore market not disseminate speculate information about iron ore price hikes, which exerted a negative impact on the iron ore market and weakened the support for HRC prices from the cost side. On the other hand, some market insiders still believe that coke prices may rise further, likely bolstering HRC prices to some degree.

As of November 28, HRC futures at the Shanghai Futures Exchange are standing at RMB 4,013/mt ($564/mt), decreasing by RMB 4/mt ($0.6/mt) or down by 0.1 percent since November 21, though declining by 0.55 percent compared to the previous trading day.

$1 = RMB 7.1132