Global View on HRC: Prices still up globally but doubts over sustainability of uptrend

Friday, 03 February 2023 17:38:06 (GMT+3)   |   Istanbul
       

Although all main hot rolled coil (HRC) suppliers have continued to target increases, the likelihood of a further strong uptrend has started to be questioned in many regions. In particular, despite Chinese mills’ post-holiday return with higher HRC export prices, which pushed up other ex-Asia offers, Chinese traders have been more cautious as regards big price hikes, emphasizing still the slower-than expected demand recovery. Meanwhile, a similar mood has been prevailing in Turkey and Europe, where local mills have continued to push for higher offers, while buyers have started to call in question the sustainability of further upward movement. In India, HRC exporters have continued to be bullish, supported by demand in Europe, though they have failed to attract more buyers in other sales outlets.

Chinese HRC suppliers finally returned to the market from the long Chinese New Year holiday this week. Major Chinese mills have increased their HRC export offers for boron-added SS400 HRC to $650-670/mt FOB, mainly for March shipment, with the midpoint at $660/mt FOB, up by $15/mt over the past two weeks, given the better mood in the domestic and futures markets along with bullish sentiments among other HRC suppliers globally. However, smaller mills and traders have been more cautious as regards big price hikes, increasing their offers only slightly, emphasizing the still slower-than-expected demand recovery, especially in the Asian region. Thus, following the increase by $5/mt over the past two weeks to $625-640/mt FOB, by the end of the week smaller mills and traders have settled their offers at $615-630/mt FOB. According to market sources, following a deal for ex-China SS400 HRC at $635/mt CFR Vietnam at the beginning of this week, the material has changed hands at $620-625/mt CFR Vietnam. Domestic HRC prices in China are at RMB 4,130-4,210/mt ($613-625/mt) ex-warehouse on February 3, with the same average price level as recorded on January 17 before the holiday, according to SteelOrbis’ data.

In Vietnam, the situation in the import HRC segment was unclear this week, after both Vietnamese buyers and Chinese suppliers returned from the long holiday. In particular, while this week the big Chinese mills increased their offers for SS400 HRC by $15/mt on average to $650-670/mt FOB, several deals for at least 10,000-15,000/mt in total of ex-China SS400 HRC have been reported through traders at $625-630/mt CFR this week, compared to offers at $630/mt CFR before the holiday two weeks ago. At the same time, according to Vietnamese customers, no firm offers for ex-China SAE1006 have been voiced, but the indicative offers are estimated at $650-670/mt CFR levels. Meanwhile, other foreign suppliers have continued to stay out of the Vietnamese market, as they have more attractive destinations in terms of prices and sales. In particular, ex-Japan SAE1006 HRC offers have been estimated at $695-700/mt CFR, while indicative prices from India have been heard at $700/mt CFR and above. Thus, the SteelOrbis reference price for import SAE1006 HRC in Vietnam has moved to $650-670/mt CFR, compared to $660-670/mt CFR.

At the same time, this week, the second largest HRC producer in Vietnam, Hoa Phat Group, announced its new prices for SAE1006 and SS400 HRC for shipments in March and April at VND 15,300-15,380/mt ($645-655/mt) CIF, where the lowest level corresponds to the prices in the northern and central regions of Vietnam, with the highest level in the south. This means that the dollar equivalent is $48-55/mt above that seen in December 2022.

Ex-India SAE1006 2 mm HRC reference prices have settled at $680-720/mt FOB with the midpoint at $700/mt FOB by the end of this week, up by $10/mt on the lower end compared to last Friday’s level. Prices have posted a smaller increase week on week as previously within a very short period prices had surged by $30/mt. The lower end of the range corresponds to the indicative level of ex-India prices to Vietnam, while closer to the higher end are the deal prices to Europe. Bids at the lower end of $670-680/mt FOB were not being accepted by sellers with the minimum acceptable price moving up to $690-695/mt FOB and several mills were reported to have sold some volumes for April shipment to Europe at $705-720/mt FOB. The latest deals to the Middle East have also been done at higher levels, at around $685-690/mt FOB. Strong demand from Europe and much higher realizations from the export market have also supported the local market, where mills have increased base prices by over INR 3,000/mt ($37/mt) for February deliveries.

In the GCC, there has been a certain interest in import HRC, since China’s expected price increase has not been as high as expected, while there has still been a need to restock. As a result, around 15,000 mt of HRC from India have been booked at $720/mt CFR to a GCC-based buyer, while in the UAE medium lots of ex-China HRC have been traded at $700/mt CFR. The fresh offers from China for SS400 grade have been set at a minimum of $690/mt CFR, but the higher levels are also expected to be heard quite soon. The indications from South Korea have stabilized for now at $745/mt CFR, while Japan has increased offers by $30/mt to $740/mt CFR.

In Turkey, HRC market players have been aiming for a better outlook in the current situation and the nearest future. Although local prices have clearly increased - by $30-40/mt to $780-790/mt ex-works - there have been a lot of concerns regarding the recently increased import duties on flats. While the inward processing regime is still in effect, many buyers and suppliers have been trying to evaluate the possible outcome of the duty hike. Most of them believe that the issue will not have a major impact on the import segment overall, while some suggest that specifically Turkish re-rollers may have to be more careful with balancing their export/import licences since the overall export demand for coated and cold rolled steel is not so great lately. In addition, China has come back from the holiday with a milder price increase than expected. Early this week, traders’ indications stood at $675-690/mt CFR and mills’ offers were at $700/mt CFR and above. Russia has also announced around $700/mt CFR for sanctioned material, while suppliers like India and Egypt have been offering at sky-high levels, at $785-790/mt CFR. The main reason is the suppliers’ focus on the European market, where their margins are higher.

In Europe, domestic prices in the EU HRC market have remained at €740-780/mt ex-works, with workable prices in Italy and Spain still standing at €740-750/mt ex-works, though the official HRC offers from southern European mills have increased to €770-780/mt ex-works, versus €760-780/mt ex-works last week. In northern Europe, prices from mills have been heard at €760-780/mt ex-works, the same as last week, while transaction prices have remained at €750-760/mt ex-works. Meanwhile, the mood has started to change in the EU HRC market this week, as more and more buyers have started to question the likelihood of a further uptrend given no visible signs of a rebound in end-user demand, though most European steel producers have remained confident in a further positive trend, and they are unwilling to provide any discounts for second quarter materials given their strong order books. In the import segment, most foreign suppliers have kept trying to increase their offers for European buyers this week. In particular, import HRC prices in southern Europe have increased by around €10/mt week on week to €720-745/mt CFR, depending on the supplier.


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