Low ex-China non-VAT HRC offers gone due to new inspections, mills’ prices almost stable

Though in general Chinese HRC export prices have been stable this week, with only some mills indicatively increasing offers by a few dollars, in some destinations buyers have faced higher price levels from China due to the complete absence of non-VAT offers. Renewed inspections at some big ports in China and one cargo being held at port for further investigation have resulted in the disappearance of cheap non-VAT HRC prices from the market.

The prices for boron-added SS400 HRC from large Chinese mills have been mainly heard at $515-516/mt FOB, which is up by $3/mt on average from last week. One large producer has even been holding its official offer at $540/mt FOB, but this level has not been taken seriously by market sources. “Some big mills like Angang and Benxi are [offering] stable at $515/mt FOB, so, even if someone tries to increase, I see the market as stable,” a major Chinese trader said. “$510/mt FOB for a mill could be ok if the quantity is good enough,” another trader confirmed.

At the same time, the offer price level from Anfeng, which usually gives the most competitive price, has been heard at $501/mt FOB on average early this week, a tiny $1/mt above that heard a week ago. “I think now all small mills and traders are offering $500-503/mt FOB including VAT,” a market source said.

But for non-VAT HRC, the situation has again changed completely. One Chinese insider told SteelOrbis that 30,000 mt of non-VAT material has been held by the government at port since late last week, so the new wave of inspections has resulted in the disappearance of all non-VAT offers. “Now all cargoes go to Bayuquan to undergo customs clearance. The inspections are severe in Jingtang now and there is no shipment from Tianjin,” a Chinese trader said. This may also affect already signed non-VAT contracts as sellers will be affected by additional transportation costs and deadweight loss charges. While last week non-VAT HRC prices were assessed at $485-490/mt FOB, this week all players polled by SteelOrbis confirmed that offers are starting from $500/mt FOB and all are for VAT-included materials.

Some buyers have already agreed to accept higher prices from China. For instance, a lot of Chinese SS400/Q195 HRC has been sold at $528-530/mt CFR to Pakistan, meaning an increase of $13-15/mt compared to a contract heard two weeks back. At the same time, there have been no new firm offers for Q195 HRC to Vietnam, but they are assessed at $520/mt CFR in the current conditions, versus previous contracts at $506-508/mt CFR.

“The export market is slow, and some higher offers may be released to meet possible new demand in the Middle East, but traditional buyers [like those in SE Asia] are still interested in lower-priced other origins [for grades like SAE1006],” a Chinese trader noted. For instance, Vietnam purchased a few cargoes from India at $552-555/mt CFR for a mix of SS400/SAE1006.

In Turkey, with the new inspections for non-VAT HRC, offers from China have been coming at $550-558/mt CFR, with the freight assessed at $50/mt or above.

In the local Chinese HRC market, HRC futures prices have indicated certain rises, bolstering the prices in the spot market to a certain degree. Meanwhile, the increasing coking coal and coke prices have positively affected HRC prices from the cost side. However, demand from downstream users for HRC has been slack, while the widespread rainy weather has also exerted a negative impact on prices. Downstream users have been unwilling to conclude purchases, weakening the support for HRC prices. It is thought that HRC prices in the Chinese domestic market will likely fluctuate within a limited range in the coming week.

Domestic HRC prices in China are at RMB 3,410-3,550/mt ($501-521/mt) ex-warehouse on June 16, with the average price level RMB 10/mt ($1.5/mt) lower compared to that recorded on June 9, according to SteelOrbis’ data. 

As of June 16, HRC futures at Shanghai Futures Exchange are standing at RMB 3,382/mt ($497/mt), increasing by RMB 21/mt ($3.1/mt) or 0.6 percent since June 9, while decreasing by 0.29 percent compared to the previous trading day, June 15. 

$1 = RMB 6.8108