Global View on HRC: Market under strong pressure from ongoing oversupply, future uncertainty

The global HRC market has been under strong pressure during the past week from continuing oversupply, with most major Asian exporters like China and India being more aggressive, trying to push volumes overseas, seeing reduced demand locally. Prices have also followed a downward trend in Turkey and in the GCC, with demand later improving. However, uncertainties for the future development of the market have also been increasing with Europe preparing to announce new trade measures from July 1.

Large Chinese mills have been offering SS400 HRC at $507-510/mt FOB for late August-September shipment, decreasing by $7/mt on average from last week. Some big mills have managed to sell at $508/mt FOB, and, though the destination is unknown at the time of publication, market sources agree that it should be for the MENA region. At the same time, the offer price from Anfeng, which usually gives the most competitive price, has been at $494/mt FOB, losing $7/mt over the past week. The general price level for small mills and traders has settled at $493-498/mt FOB, down by $6/mt from last week. All the offers mentioned above are inclusive of VAT, while non-VAT offers are still limited. Only Bayuquan port and Lianyungang port are open for non-VAT operations, and traders are working mainly on shipments of already signed contracts.

In Turkey, local HRC prices have settled at $615-630/mt ex-works, down $5-10/mt over the past week, amid cautious buying and weak scrap prices. In addition, export market activity has been almost silent due to the lull in the EU. As a result, HRC export prices from Turkey have settled at $600-620/mt FOB depending on the mill, for August and September shipments. However, some sources have reported offers for July-August at $590-595/mt FOB which, according to European buyers, should be the levels for the starting point of negotiations based on current market conditions. Import offers from China have been at $545-548/mt CFR during most of the week, though some buyers have also reported discussions at levels $5-10/mt lower.

In North Africa, domestic prices for HRC in Algeria have remained at DZD 108,000/mt ($680/mt) ex-works, while realistic demand has been seen at levels DZD 3,000/mt ($20/mt) lower. Overall demand in Algeria has been at the slow side for HRC due to the upcoming election and seasonal impacts. Export offers for HRC from Algeria are at $630/mt FOB for the MENA/Africa region and at around $660-670/mt FOB for the EU, but are indicative. In Egypt, local HRC prices have increased by EGP 1,000/mt ($18/mt) to EGP 40,000/mt ($708/mt) ex-works, while export offers have not been heard this week since the mill prefers to focus on domestic sales. The latest offers to North Africa from Turkey have stood at $620/mt CFR Egypt, while China has been at $575-580/mt CFR Egypt and $595-600/mt CFR Algeria, SteelOrbis has learned.

Russian HRC producers remain absent from their usual export markets of Turkey and the MENA region, being focused on sales to Iran, with $560-570/mt FOB Astrakhan levels still workable. In the domestic market, deal prices for HRS (thin) are at RUB 61,000-62,000/mt ($660-670/mt) CPT, with potential to increase, while thick HR sheets are offered at RUB 65,000/mt ($705/mt) CPT, sources reported.

The SteelOrbis reference price for ex-India HRC has settled at $515-580/mt FOB, with the lower end of the range corrected down by $5/mt over the past week. The lower end of the range corresponds to the levels in Vietnam, while the higher end represents the offer level for Europe, though market activity is still frozen in the latter, ahead of new measures to be announced on July 1. Some mills were still asking for $550/mt FOB for non-EU destinations, but this level has been assessed as fully unworkable and trades have been limited even after discounts. An eastern India-based mill is reported to have been successful in concluding a sale of 30,000 mt for delivery to the Gulf at a price of $540/mt FOB.

In the GCC’s import HRC market, lower-priced offers have started to generate more buying interest this week, even though demand from end-users remains slow across the region. Buyers in Saudi Arabia and the UAE are still cautious about building large positions, but the availability of more competitive Chinese and Indian material has kept negotiations active. On the Chinese side, some discussions are heard at around $560-570/mt CFR Saudi Arabia and the UAE, though market sources have not confirmed any firm bookings at these levels. Chinese SS400 offers for August-September shipment are now mainly indicated at around $560-570/mt CFR Saudi Arabia, while offers to the UAE have moved down to around $580-585/mt CFR. For Chinese SAE1006, indications are currently heard at around $585-590/mt CFR GCC, narrowing from last week’s wider range. Meanwhile, Indian origin HRC has become more competitive in the UAE, following a 30,000 mt sale to pipe producers at $540/mt FOB, equivalent to around $585/mt CFR UAE, for end-of-July shipment. After this sale, Indian offers for August-September shipment are also being indicated at around $585/mt CFR UAE, compared to last week’s $600-610/mt CFR UAE workable levels.

The SteelOrbis reference price for import SAE1006 in Vietnam has settled at $542-551/mt CFR, down by $16/mt on average over the past week. The lower end of the range translates to an offer seen for a mix of SS400 and SAE1006 HRC from India reported late this week. However, even though this signals a price decline for Indian coils from $555-565/mt CFR last week which major mills had been trying to resist, buyers have remained cautious since they think that in the new round of purchases in July they may get lower prices locally and will not have a long wait for import materials to arrive. At least one offer for 20,000 mt of Indonesian coils from a trader has been reported at $551/mt CFR. In the local Vietnamese HRC market, one of the major mills has finished its June round of HRC sales. The mill’s price for the export market has been heard at the latest at $550/mt FOB and its last domestic sales were equivalent to $555-565/mt CIF (excluding VAT), versus the levels of $583-584/mt CIF announced in early June. Moreover, some traders, having high inventories, have provided discounts to sell at VND 16,000/mt with VAT, which translates to $553/mt excluding VAT.

A few Chinese HRC contracts have been done to Vietnam at lower levels. A contract for 10,000 mt of ex-China Q195 HRC has been heard at $500-502/mt CFR, down from the previous contract at $506/mt CFR and indications heard early this week at $508/mt CFR. Even though non-VAT trading from China has been close to zero now, some traders have been offering in short positions, expecting Chinese prices from mills to go down further. Also, 1,000 mt of Chinese SPHC pickled and oiled coils has been sold at $565/mt CFR, down by $8/mt from the previous contract for the same grade. A similar level is achievable for 1 mm CRFH from China.

The European HRC market has been at a standstill this week as most players are awaiting clarifications regarding the new quota system. According to market information, suppliers have already received the draft and so the market should hear the decision shortly. domestic HRC prices have remained at €700-720/mt ex-works depending on the country, with the higher end mainly seen in Spain and in the northern region of Europe. The workable levels, however, remain at €680-690/mt and up to €700/mt ex-works, with little business seen. The import segment has been almost muted this week with only a few offers reported. Some Indian HRC offers have been reported at $650-665/mt CFR, while Vietnamese HRC has been available at around €565/mt CFR, sources reported. Ex-Turkey HRC offers have been reported this week at €570-595/mt CFR. As regards DDP-based prices, there have been hardly any negotiations, with only several indications heard in the market. Ex-Japan HRC has been available at €710/mt DDP, while ex-Turkey HRC has been at €680/mt DDP.

*- The lower end corresponds to traders’ latest sales, while mills also cut prices to sell the last part of allocations for this month at $560-570/mt CIF.