Global View on HRC: Negative mood in some major markets, but high costs provide limited support

There has been no definite trend in the global HRC market this week since, even though in certain important outlets like Turkey and Southeast Asia prices have softened, some major exporters have started to resist price declines because of their high costs (with increases seen in coke and coking coal prices in particular). Though generally expectations are still negative, market sources believe that the market may stabilize for a short period and then resume a downward trend closer to the end of the month.

Ex-China HRC prices have been corrected down this week, but this has mainly been due to the increase seen a week ago, which was considered to be unreasonable. The prices for boron-added SS400 HRC from large Chinese mills have been mainly heard at $510-515/mt FOB, down by $17.5/mt on average over the past week. At the same time, offers from smaller private mills and some traders (excluding non-VAT) are at $500-505/mt FOB, down by $5/mt on average. Non-VAT HRC offers are still rare, but market sources said that some $485-495/mt FOB offers could be found, which, however, “is too risky for major buyers”, a large trader said. But by the end of the week, the Chinese market is stable and market sources expect that mills and traders will be less flexible and will not cut offers more in the near future due to the increases in local coke and coking coal prices. Even though the Chinese government said it will ensure supply of coal in summer, there was still an increase in prices of both coke and coking coal (coke up RMB 55-110/mt and coal up by RMB 60/mt) in the local Chinese market this week, which pushed up Chinese mills’ costs.

Vietnam’s import HRC market has also remained bearish this week and a few deals have been signed at lower levels. But trading has been mainly focused on Indian material as sellers from this country have been the most flexible, offers for Indonesian coils have decreased only slightly, while some Chinese exporters have not been ready to cut prices and a deal has even been signed at a slightly higher level. A deal for a combination of Indian SS400 and SAE1006 HRC has been done at $555/mt CFR, which is down by $10/mt from indications seen last week and almost $20/mt below the previous deal signed for the same origin in late May. Moreover, there has been a rumor about a sale of Indian coils at $552/mt CFR, though this has remained unconfirmed. Indonesian HRC prices have also softened but by much smaller margins - by $3-5/mt to $563-568/mt CFR. As for Chinese HRC, a deal for 10,000 mt of Q195 HRC with early August shipment has been signed at $504/mt CFR this week, just $2/mt below the previous contract price. Chinese SPHC pickled and oiled coil offers have been heard and a small volume has been sold at $575-576/mt CFR, up by $5-6/mt from the level seen in the latest deal.

In India, the slowdown in domestic sales and rising inventories have been prompting a few large Indian mills to be more aggressive in pushing overseas sales by higher discounting. At least two deals were heard to have been done in Vietnam, three cargoes were sold to the GCC and an additional contract was reported for Europe. The SteelOrbis reference price for ex-India HRC is stable on average at $520-580/mt FOB, but, while last week the lowest trading levels were at $535-540/mt FOB, this week they fell to $525-535/mt FOB (in sales to Vietnam).

In Turkey, HRC prices have softened during the past week as expected, amid pressure from relatively low demand, especially for exports. In addition, import scrap prices have been sliding as well, and so Turkish mills have been forced to show flexibility in their HRC prices. Local offers have settled at $625-640/mt ex-works, with some indications voiced at $645-650/mt ex-works, but these are considered to be unworkable. Moreover, large buyers are expected to push for $610-615/mt ex-works at the highest. It is noteworthy that last week small lots for August deliveries were booked at $645-655/mt ex-works. HRC export offers from Turkey are officially at $630/mt FOB, but, according to buyers from North Africa and Europe, some negotiations have already been concluded at $615-625/mt FOB. Based on the current market conditions, many believe Turkey’s export prices will head towards $600/mt FOB in the coming couple of weeks. Import HRC offers from China have been at $545-555/mt CFR, with the latest deals closed at $538/mt CFR to a re-roller and at around $545-547/mt CFR to a pipe-maker. No solid offers from other suppliers have been voiced with Russia and Malaysia staying away from the Turkish market. An Egyptian mill, according to market sources, has traded some volumes to Turkey at around $645-650/mt CFR base.

In North Africa, Algeria has been active in export offers, still having some allocation for June, with offers being at $690-700/mt FOB for Europe, at $640-650/mt FOB for African countries and at $670/mt FOB for the US. An Egyptian mill prefers to act silently, with some deals to Turkey reported at around $620/mt FOB, while in North Africa its offers have been heard at $640/mt FOB. Import offers to the region have been mainly at $580-600/mt CFR from China depending on the buyer, with no new deals reported. Domestic HRC prices in Algeria and Egypt have settled at DZD 108,000/mt ($680/mt) ex-works and EGP 39,000/mt ($658/mt) ex-works, respectively.

Russian HRC producers are focused on sales to Iran where they can achieve $560-570/mt FOB Caspian Sea, and also to nearby CIS countries, which accept offers at around $520-530/mt FOB. As a result, there are no offers to the usual regular destinations from Russian mills. Based on the ongoing sales to the CIS and Iran, the evaluated target levels from the Black Sea region are at $515-520/mt FOB, with target levels from the Baltic Sea at $520/mt FOB, both for sanctioned material. The non-sanctioned Russian HRC producer, though not being able to deal with Iran, is also out of the export market, being focused on sales in the domestic market, where demand has temporarily improved. The prices from some Russian mills have increased from RUB 59,000/mt ($670/mt) CPT to RUB 61,000/mt ($695/mt) CPT.

In the GCC, sentiment has strengthened slightly this week, with market participants reporting higher levels of enquiries and purchasing activity compared to recent weeks. While buyers have continued to seek discounts, suppliers have shown a greater readiness to discuss tradable levels, contributing to fresh business in the region. Against this backdrop, a major Indian supplier is reported to have sold around 90,000 mt of HRC to the UAE at approximately $600/mt CFR. Nevertheless, official Indian July shipment offers are still heard at $550-560/mt FOB, although suppliers are said to be increasingly open to negotiations in order to secure export orders. Meanwhile, no fresh Chinese-origin deals have been reported so far this week. Chinese HRC offers for July shipment to the UAE have softened to $580-590/mt CFR, compared to $585-600/mt CFR heard previously, while some market participants have indicated that levels of $570-575/mt CFR could be workable for serious buyers.