Local Chinese HRC prices stable despite extremely weak demand

Domestic HRC prices in China are at RMB 3,340-3,450/mt ($492-508/mt) ex-warehouse on July 28, with the average price level RMB 7/mt ($1/mt) lower compared to that recorded on July 21, according to SteelOrbis' data.

HRC futures prices have indicated slight decreases over the past week, exerting a negative impact on the prices in the spot market. Previously, due to losses, steelmakers cut their production of HRC, bolstering prices to a certain degree. This helped mills to protect prices from any big losses.

However, some HRC producers have resumed production activities lately or will be increasing operations back to normal by the end of this week, which will result in slight rises in outputs and will contribute to increases in inventories. Following the cooling effect of Typhoon Noul, a new wave of high temperatures will hit most regions of China, which will negatively affect the demand for HRC. At the same time, declining coke prices might weaken the support for HRC prices from the cost side.

Since the end of July is approaching, China's Politburo meeting will likely be held soon. Market players have increased expectations for stabilization policies and monetary easing through reserve requirement and interest rate cuts, which would bolster market sentiments firmly.

It is expected that HRC prices in the Chinese domestic market will move sideways in the coming week.

As of July 28, HRC futures at Shanghai Futures Exchange are standing at RMB 3,281/mt ($483/mt), decreasing by RMB 16/mt ($2.4/mt) or 0.5 percent since July 21, while down 0.42 percent compared to the previous trading day, July 27.

$1 = RMB 6.7928