Sentiment in ex-China HRC market worsens, local and export prices soften

Extremely hot weather conditions have negatively affected demand for HRC in China and have also weakened market sentiment. Moreover, the performance of the real estate market has not been so good due to financial tightness and the Covid-19 pandemic, and this has also exerted a negative impact on the steel market. As a result of poor demand, China’s local and export HRC prices have posted some slight declines over the past week, SteelOrbis learned on August 16.

Export offers for boron-added SS400 HRC given by major Chinese mills have come down to $610-620/mt FOB, with a midpoint at $615/mt FOB, down by $10/mt week on week. This happened mainly as the high offers of some mills voiced at $640/mt FOB last week have disappeared, while a number of large producers like Shagang and Bengang have still been asking for $615/mt FOB or slightly lower. Offers from smaller mills have been at $605/mt FOB, though lower levels have been available in negotiations.

The tradable level for ex-China SS400 HRC has also declined slightly over the past week to $580-610/mt FOB, depending on the destination, versus $580-620/mt FOB a week ago. Some big mills have started to offer prices similar to traders at $610-615/mt CFR Vietnam. According to market sources, the local HRC price decline announced by Baosteel has been assessed as a negative sign for the near future. However, Vietnamese customers have been aiming for lower prices for SS400, at $600-610/mt CFR, down by $10-20/mt from the previous deals for this grade of HRC from China.

Market sources believe that, even though expectations for September-October are still good, a demand rebound in this period would hardly be enough to offset higher supply, and so prices could not move up.

In the SAE1006 HRC segment, demand has been even worse for Chinese exporters. The indicative offer level for ex-China SAE1006 has been reported at $630/mt CFR Vietnam and $650-670/mt CFR Pakistan, which has attracted zero interest due to tough competition with a number of large exporters like India, Japan, Taiwan and South Korea.

During the given week, HRC prices in the Chinese domestic market have seen slight declines amid the slightly decreasing trend of HRC futures prices. Widespread hot weather has hit China, exerting a negative impact on the demand for HRC from downstream users, though market players look forward to a better situation from late August. It is expected that HRC prices in the Chinese domestic market will likely move sideways in the coming week.

Domestic HRC prices in China are at RMB 4,010-4,100/mt ($595-609/mt) ex-warehouse on August 16, with the average price level RMB 23/mt ($4.9/mt) lower as compared to August 9, according to SteelOrbis’ data. 

As of August 16, HRC futures at the Shanghai Futures Exchange are standing at RMB 4,050/mt ($601/mt), increasing by RMB 1/mt ($0.15/mt) since August 9, but down RMB 37/mt ($5.5/mt) since Friday, August 12. 

$1 = RMB 6.741