Global View on HRC: Prices expected to bottom up as negative factors fade away for now

This week, prices for HRC in major outlets have posted some small decreases, signaling that the fundamentals are still weak and demand is insufficient. But most market sources agree that this may be the bottom for now as the Chinese market has posted some increase in futures prices, which is a positive sign after a long-standing weakness, while, with higher freight rates in the GCC region and the absence of European customers, declines in prices are also doubtful.

Chinese HRC exporters lowered their prices early this week due to the considerable weakness of local demand and lower raw material prices, but the mood has gradually become better by the end of the week. And most market sources believe that Chinese coil prices will not go below $490-495/mt FOB from large mills and $485/mt FOB from small mills. The lowest tradable level for SS400 HRC was at $480-482/mt FOB early this week, with firm bids from some destinations at this level. But major mill Anfeng has increased its price by $3/mt to $485/mt FOB on Friday amid the increase seen in futures and iron ore prices and the overall “warmer market sentiments”, according to Chinese sources.

Major Vietnamese mills have announced new HRC prices for the local market for September, cutting them by $12-17/mt over the past month, but, even though the decline had been awaited, most market sources said they had expected lower levels from the producers in the current market conditions. Hoa Phat's prices came down to $535-536/mt CIF (excluding VAT), down by $14/mt month on month. FHS's new prices were announced at $521-532/mt CIF for north Vietnam and $526-536/mt CIF for south Vietnam. The lowest price level for large orders of over 20,000 mt is around $520/mt CIF. As most market sources expected lower prices from large mills and since buyers have decided to replenish stocks and have been active in purchases this week, the import HRC market seems to have hit the bottom.

As a result, at least one deal has been heard at a slightly higher price level in Vietnam. A contract for 30,000 mt of ex-Indonesia HRC is heard to have been done at $508/mt CFR, which is up from the previous sale reported early this week at $503-504/mt CFR. Negotiations for an ex-India mixed cargo of coils consisting of 70 percent 3 mm and 30 percent 2 mm have been heard at $510/mt CFR. Nevertheless, another contract for 30,000 mt of Indonesian HRC to Vietnam has been reported at $501-502/mt CFR. Market sources confirmed that this low level is for September shipment, but some believe the contract was signed a bit earlier. The SteelOrbis reference price for import HRC in Vietnam stands at $504-515/mt CFR (the lower end is the average of all bookings reported this week).

In Turkey, local HRC prices have settled at $580-590/mt ex-works this week, with slightly higher levels also reported but considered unworkable. Some bids from domestic customers were at $570-575/mt ex-works, but most mills have been resisting these levels. In the meantime, export offers for HRC from Turkey are at $570-580/mt FOB for September shipments and, according to sources, around 20,000 mt have been sold to Macedonia at $589/mt CFR. The European Union is mainly out of the market due to the holiday season, but also following the large bookings closed previously from Turkey and some Asian countries. Import HRC from China has been offered at $527-537/mt CFR in Turkey during most of the week, while Indonesia and Vietnam have stood at $550-555/mt CFR, with no takers around. The Egyptian mill has returned to the market with $640/mt CFR offers, which have been considered too high for the current market conditions. The latest price from Malaysia has stood at $570/mt CFR, with a slightly lower level fixed in a deal to a re-roller, SteelOrbis reported.

Ex-India HRC offers have been quoted lower in the range of $473-565/mt FOB, compared to $480-575/mt FOB a week earlier, but barring stray deals for small volumes, trade activity has remained at a very low ebb. Among the very few deals confirmed over the past week, a sale for 8,000 mt for delivery to Vietnam was concluded at $473/mt FOB, almost $10/mt lower than a similar deal in the earlier week. This translates to $503-505/mt CFR. But the deal was rather an exception than a common price available from Indian mills. Most offers to Southeast Asia from India are still at $480/mt FOB. At least two mills are heard to have submitted offers at around $565/mt FOB in Europe, also about $10/mt lower than in the previous week. However, deals were not yet confirmed, with trade circles citing the dwindling available quota and competitive challenges standing in the way of the conclusion of deals. Also, on CFR basis, prices did not change much amid increasing freight costs.

In the EU, market activity has been mostly diminished due to the holiday season and trade is expected to revive by September. After numerous bookings from Turkey, Vietnam, India, Egypt and Japan, the EU is mainly relatively comfortable even for the fourth quarter. Most players expect that, while local HRC prices will mostly increase after the holidays, European buyers will not be so hungry for imports, having already restocked significantly. The latest HRC prices in the southern countries of the EU stand at €710-730/mt ex-works, while in the northern part of the EU price indications have been reported at up to €720-750/mt ex-works. In central Europe, according to sources, ArcelorMittal's prices have been at €740-750/mt CPT, with overall deals done in the region at €730-740/mt CPT at the highest, with some offers for import material reported at €720/mt CPT. In the import HRC segment across the EU, not many offers have been seen. According to sources, in Spain, DDP offers from Japan have been at €745/mt, with small sales closed at €710-720/mt, while Vietnamese offers have softened to €720/mt, from official offers of €750/mt, but its seems that no sales have been concluded.

In the GCC this week, the import HRC trade has been increasingly shaped by shipment difficulties rather than by changes in HRC offers, with limited bulk vessel availability and longer port waiting times making fresh business harder to conclude. Although Chinese and Indian FOB offers have both moved lower, the benefit of these declines has been largely offset by another increase in freight costs, leaving CFR levels too high to encourage buyers back into the market. Chinese SS400 HRC for September shipment has fallen to around $480-490/mt FOB from $490-500/mt last week, while freight has risen to $75-85/mt from $70-80/mt, resulting in indications of approximately $555-575/mt CFR GCC. A similar situation is seen for Indian HRC, where September offers have declined to around $515-520/mt FOB from $530-540/mt, but the jump in freight to $75-85/mt from $50-60/mt has pushed delivered levels to around $590-605/mt CFR GCC. At the same time, some UAE-based sources continue to report Indian offers at $530-540/mt FOB, indicating that pricing remains uneven among suppliers amid the current logistics difficulties.

*- the lower end only for high volumes orders of 20,000 mt of above