Global View on HRC: Most global sellers still optimistic, some turbulence in China amid futures slump

Friday, 01 December 2023 17:06:20 (GMT+3)   |   Istanbul

In the last week of November, most global hot rolled coil (HRC) suppliers remained bullish. Specifically, in Asia sellers India have increased their export offers to Europe, where local and import HRC prices have kept increasing amid higher restocking. Besides, Turkish mills have increased their HRC prices in new deals to local buyers in line with the improved market outlook brought about by firm scrap prices. However, although most major Chinese mills have maintained their HRC export offers unchanged, uncertainties and price fluctuations have emerged among Chinese traders amid the slump in HRC futures prices, affecting other Asian markets, such as Vietnam, where several ex-China HRC booking have been reported at lower levels this week.

The upward surge in the ex-China HRC market 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. 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, up by $2.5/mt on average week on week. 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. Furthermore, more deals for SAE1006 HRC have been reported as well at around $560-565/mt FOB, though most offers have been at $580/mt FOB and above. Domestic HRC prices in China are at RMB 4,060-4,140/mt ($573-584/mt) ex-warehouse on November 30, with the average price level RMB 30/mt ($4/mt) lower compared to that recorded on November 24, according to SteelOrbis’ data.

This week has started with some turbulence in the Vietnamese HRC market amid the decline in ex-China HRC price offers. Specifically, given the fluctuations for ex-China HRC offers, several deals for around 5,000 mt of Q195 HRC have been heard at $555/mt CFR, for January shipment. 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, down by $5/mt week on week. Furthermore, 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/SAE1006 HRC were sold at $575-578/mt CFR at the beginning of this week, while by the end of the week market insiders have reported around 30,000 mt in total were booked at $575/mt CFR through traders. However, most SAE1006 HRC offers have remained at $580/mt CFR, while offers from Chinese mills are still at $590-600/mt CFR.  Thus, the SteelOrbis reference price for import SAE1006 HRC has settled at $575-580/mt CFR, the same as last week, as, even though several deals have been reported at lower prices, most sellers have refused to go lower than $580/mt CFR. At the same time, Vietnamese producer Hoa Phat Group announced its new local prices for HRC for shipment in February on December 1, hiking them officially by $35/mt month on month to $603-605/mt CIF, though the tradable price for large orders has gained $25/mt over the period under review, reaching $595/mt CIF.

Indian mills have been submitting HRC offers in the wide range of $590-650/mt FOB, against $590-640/mt FOB last week, with the lower end of the range corresponding to the “notional” prices for Asia and the Middle East, while the higher end corresponds to offers in Europe. According to sources, several deals for small tonnages have worked out at around $630/mt FOB, triggering some optimism for overall trade activity improving in the New Year. However, by the end of the week ex-India HRC offers in Europe have been voiced at €640-650/mt CFR, which translates to around $650-660/mt FOB.

In Europe, market sources have reported improved restocking activity in the region for domestic HRC mainly for January deliveries, while import alternatives have been limited and slightly higher in terms of prices this week. The range of achievable levels in the spot market has been at €650-670/mt ex-works, up by €10-20/mt over the past week, with the lower end of the range corresponding to deal prices in southern Europe and with the higher end in northern Europe. At the same time, both mills in the south and in the north have been planning to push for €700/mt ex-works and €720/mt ex-works, respectively, before 2024, supported by better restocking. As for imports, most offers have settled at €630-660/mt CFR, up by €10/mt week on week. However, according to sources, buying activity has been extremely limited due to the high risks of having to pay the EU’s import safeguard duty.

Costlier scrap and slab prices in the Turkish market, coupled with relatively positive moods and expectations, have resulted in a considerable price increase from local flats mills. While trading at around $640-650/mt ex-works last week, HRC prices have moved up to $680-690/mt ex-works and even $700/mt ex-works in offers. Moreover, according to sources, some medium-sized lots have already been traded at $660-670/mt ex-works and at up to $680/mt ex-works in some cases. In the import segment, ex-China offers have been mainly hovering at around $600-605/mt CFR, versus $587-595/mt CFR in the most recent transaction. Next week, Chinese suppliers are expected to increase their offers to Turkey depending on the market developments. Scrap is now considered to be at around $400/mt CFR for HMS I/II 80:20, while steel slabs have been rising from deals concluded at $560/mt CFR levels previously closer to $570-585/mt CFR depending on the origin.

In the UAE, while some Emirati buyers have decided not to replenish stocks due to limited demand and potential price reductions in China, other purchasers made the decision to buy sufficient quantities before prices rise once again. As a result, this week UAE customers purchased 10,000-15,000 mt of SS400 grade HRC ex-China at $590-595/mt CFR for shipment in January, while SS400 offers settled at $590-600/mt CFR. In addition, this week SAE1006 purchases in quantities of 10,000–15,000 mt at $610/mt CFR from China were concluded both to the UAE and Saudi Arabia. Given the upward trend observed in ex-China offers, Japan and South Korean suppliers have decided to increase their offers. Consequently, the latest South Korean offers have increased to $655/mt CFR, up from $585-595/mt CFR in previous weeks, while Japanese suppliers have raised their offers to $620-630/mt CFR, up from $610/mt CFR before.

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