Sharp decline continues in China’s hot rolled market

Over the past week China's domestic hot rolled market continued its considerable downward movement against a background of rising market inventory levels which have been increasing the downward pressure on the market.

The eastern China hot rolled market registered a rapid fall in the past week, with the prices of 4.75 mm HRC dropping from RMB 3,300/mt ($483/mt) to RMB 3,100/mt ($454/mt). At the end of the week, many sellers that had already suffered great losses were unwilling to sell at further reduced levels, and so the market prices gradually became stable. In the north, the market showed a weak decline in a context of general pessimism in the market. Meanwhile, Angang, Baotou Steel, Chengde Steel and Handan Steel have been carrying out overhauling work on their hot rolled production lines, thereby alleviating the inventory pressure on the northern China market to a certain extent.

Last week, Chinese mills generally made no adjustment to their prices. Angang and Benxi Steel are expected to announce their prices for May soon, with reductions likely based on the current market situation. According to market rumors, the ex-factory HRC prices (tax included) of Angang for May will be slightly lower than the present sales prices in leading markets like Tianjin and Shanghai.

Looking at the current situation, traders are ordering HRC from China's major mills in a price range of RMB 3,100-3,200/mt ($454-469/mt). If the market remains the same, there will not be much room available for further downward movement in mills' prices in the short term.

Nevertheless, as a result of the continuous fall in raw material prices, mills are unlikely to make any big cuts to their production for April. Furthermore, given the April arrivals of import materials, the market will continue to experience strong inventory pressure, thus making it any improvement in market prices impossible in the coming days.