Global View on HRC: Demand not price is the main issue

The global HRC market has not shown drastic changes in prices this week, with the Chinese and Indian markets being rather stable. In some trade destinations, like Vietnam, Turkey or even in Europe, prices have posted some declines for specific origins due to weakness in sentiments. Generally, most market participants agree that demand itself is the problem, not the absence of discounts from major exporters.

Though generally, the Chinese market has been almost stable, early this week big Chinese mills voiced slightly higher HRC export offer prices - at $525-535/mt FOB, with a midpoint at $530/mt FOB, up by $3.5/mt since last week. Since the Shaanxi accident, more than 2.56 million mt annual capacity was cut for five working days and this week massive inspections at coal mines have been ongoing, which boosted sentiments in the HRC segment. However, small mills and traders have kept their offers at the same levels, or some have even given some discounts as they do not believe in an uptrend of prices in the current conditions of lower local demand and rather higher export allocation. Small mills and traders have voiced offers at $500-515/mt FOB, down by $2.5/mt week on week, and some non-VAT offers have been heard at below $500/mt FOB. Deals for Chinese Q195 have been reported at $506/mt CFR to Vietnam and $515/mt CFR to Pakistan this week.

Both major Vietnamese mills have announced new local prices this week: Hoa Phat’s local HRC prices have lost $13/mt to $583-584/mt CIF, while FHS’ prices have settled at $579-589/mt CIF. This negative adjustment was expected by market sources, considering the very sharp previous rise and sliding import prices in the second half of May.

As for the Vietnamese HRC import segment, prices have continued to slide, while demand has been subdued and only for small volumes. The latest offers for ex-India SAE1006 HRC are at $560-570/mt CFR, but bids have already dropped to $550-560/mt CFR. No new deals have been heard after the sale of SAE1006 at $575-576/mt CFR Vietnam. Official offer prices from the Indonesian mill have been coming at $572/mt CFR, but some offers from traders have already been reported at $565-568/mt CFR. A deal for Chinese SPHC pickled and oiled coils has been heard at $570/mt CFR for August shipment, down by $7/mt from the level in the previous small-volume deal signed a week ago.

Ex-India HRC trading activity lapsed into silence late last week and early this week, which resulted in additional discounts provided to some outlets. With buyers in the Middle East pausing negotiations as demand weakens and, with prices expected to settle at lower levels, customers in Asia and Europe are also asking for discounts. The SteelOrbis reference price for ex-India HRC has been corrected down by $10/mt over the past week to $510-590/mt FOB. In particular, sales from India to Vietnam were done at $575-580/mt CFR a week ago, but the new indications are already at $560-565/mt CFR, which translates to $530-535/mt FOB. The monsoon season will start soon and hence demand will gradually slacken after mid-June, and some mills may be willing to cut prices to get orders from Vietnam. The latest offers from India to Europe were stable at $600-610/mt FOB, but by the end of the week a deal at around $650/mt CFR has been reported in the market, which translates to $580-590/mt FOB depending on the freight.

In Europe, local HRC prices have more or less stabilized over the past week at €680-700/mt ex-works in official offers, with the similar levels being workable in the northern part of the EU. In Italy, the tradable levels have been at €670-680/mt ex-works, with a few bids for August production reported at €660-670/mt delivered. A certain price increase is expected to be announced by ArcelorMittal in Europe in July-August, which is logical amid scarce imports. Import offers for HRC from Asia on DDP basis have settled at €690-750/mt depending on the region, while Turkey and Asia stand at €690/mt and €720-730/mt levels, respectively. In the CFR import segment, offers from Turkey have been at €605-615/mt, down slightly over the past week. For India, most of the sources reported offers at $680-685/mt CFR, but some reported a deal at $650/mt CFR for a decent volume to Spain.

In Turkey, sentiment in the HRC market is rather weak since mills are trying to maintain offers at high levels, but seem unable to generate enough demand. Trade in the local market has been slow due to the impact of the political situation in the country on expectations and financing, while, as regards exports, buyers in the EU in particular are refraining from purchases amid the uncertainty surrounding quotas. Local Turkish prices are at $630-655/mt ex-works currently, but the medium-size and large buyers are expected to place bids at $620/mt ex-works and below, sources stated. For export, most official offers are still at $630-640/mt FOB, but, according to market players’ evaluations, realistic levels are closer to $610-615/mt FOB. Moreover, Europe is now expected to seek levels of $600/mt FOB and lower. Import offers from China have been at $540-565/mt CFR depending on the supplier, with the lower end corresponding to non-VAT material, while the upper end is for offers from first-tier mills. There has been talk about a deal to a Turkish re-roller done at around $540/mt CFR, but the information has not been fully confirmed by the time of publication. Firm HRC offers from Russia, Egypt and Malaysia are currently absent from the market. 

In North Africa, an Algerian mill has increased its local HRC price to DZD 108,000/mt ($681/mt) ex-works for June and July deliveries, from DZD 101,500/mt ($640/mt) ex-works. The supplier’s HRC export prices vary depending on the destination. In fact, for African countries its offer is at $640/mt FOB, for the US it stands at around $670/mt FOB, while for the EU, according to sources, its offer is at $710-720/mt FOB. However, for the EU specifically, the buyers and traders expect the supplier to go down to $690/mt FOB at least due to slow trade. The Egyptian HRC mill, on the contrary, has remained out of the export market this week, while some sources expect it to announce prices of around $615-620/mt FOB for August shipment. In particular, Turkey expects levels of $640-650/mt CFR as an initial offer early next week. Local HRC prices in Egypt have remained stable at EGP 39,000/mt ($660/mt) ex-works.

In the import segment, HRC offers from China to Algeria stand at $620/mt CFR for thin gauge material and at $590-600/mt CFR for base grade. In Egypt, ex-China base HRC offers have been reported at $585-590/mt CFR, while indications from Russia have been voiced at $560-590/mt CFR depending on the mill.

Russia’s HRC export presence currently has been almost entirely concentrated on trade with Iran, where demand has remained lively amid the lack of domestic supply. The most recent workable price levels stood at $560-570/mt FOB Astrakhan, which is much higher than the potential workable price levels in the markets accepting shipments from the Black Sea and Baltic Sea. In fact, in the Black Sea area, the workable price in Turkey is assessed at $570-575/mt CFR or maybe slightly above for non-sanctioned material, which is around $550-555/mt FOB, while bids for sanctioned material will most probably settle at $525-530/mt CFR maximum, which is equal to $500-505/mt FOB. In the Baltic region, according to sources, the supplier does not intend to sell below $500/mt FOB, which would mean around $560-570/mt CFR to Turkey and regular MENA destinations. In the Russian domestic market, the latest workable prices for HRS stand at RUB 59,000/mt (around $660/mt) CPT.

*- but tradable level for the Asian market lost $5-15/mt to $530-540/mt FOB