Mood in ex-China HRC market worsens amid another futures price slump

Following a slight drop in ex-China HRC quotations last week, this week has brought another fall in offers both from mills and traders, though trade has remained limited amid generally slow demand globally.  Besides, HRC prices in the Chinese domestic market have continued to move down amid decreasing futures prices and slack demand from downstream users.

At present, export offers for boron-added SS400 HRC given by major Chinese mills have come to $530-550/mt FOB, with a midpoint at $540/mt FOB, down by $5/mt week on week. Meanwhile, according to sources, most big mills have been offering their materials at $530-535/mt FOB, against $540-545/mt FOB last week, while only a few offers are still reported at $550/mt FOB and are considered to be unworkable. “We heard Benxi Steel is officially offering its HRC at $550/mt FOB, though its workable price level has been estimated at $535/mt FOB,” a Chinese trader said.

Meanwhile, the tradable level for ex-China SS400 HRC has been heard at $515-530/mt FOB, down by $10-15/mt week on week, depending on the destination. The lower end of the range corresponds to ex-China Q235/SS400 HRC offers in Vietnam at around $530-532/mt CFR, versus $545/mt CFR last week. At the same time, Chinese offers to the Middle East have been estimated at $575/mt CFR, down by $5-15/mt over the past week, while ex-China Q195 HRC offers to Turkey have been voiced at $570-575/mt CFR levels.

In the meantime, domestic HRC prices in China have settled at RMB 3,830-3,930/mt ($539-553.5/mt) ex-warehouse on June 4, with the average price level RMB 76/mt ($11/mt) lower compared to that recorded on May 28, according to SteelOrbis’ data. During the given week, production of HRC has been at relatively high levels, resulting in strong pressure on the supply side, while demand from downstream users has remained slack, exerting a negative impact on HRC prices. At the same time, inventory of HRC has increased, negatively affecting prices. Moreover, import iron ore prices have indicated a downtrend, weakening the support for HRC prices from the cost side.

As of June 4, HRC futures at Shanghai Futures Exchange are standing at RMB 3,788/mt ($533.5/mt), decreasing by RMB 82/mt ($11.5/mt) or 2.1 percent since May 28, while down 0.58 percent compared to the previous trading day, June 3.

$1 = RMB 7.1083