Slight uptrend in Chinese HRC market

Hot rolled coil (HRC) prices in Chinese domestic market have slightly increased in the past week. As of July 19, the average HRC prices in the main markets in China are as follows:

As of July 19, the prices of Q235/S400 5.75 mm HRC in Shanghai, Tianjin and Lecong are respectively at RMB 4,800/mt ($743/mt), RMB 4,720/mt ($731/mt) and RMB 4,930/mt ($763/mt). For Q235 2.75 mm HRC, prices are settled at RMB 4,850/mt ($751/mt), RMB 4,750/mt ($735/mt) and RMB 4,990/mt ($772/mt) in the abovementioned cities. All prices include 17 percent VAT.

The increase of HRC prices have been mainly due to the continuous uptrend seen in the futures market. However, there were not any significant improvements in the demand coming from downstream industries. Amid the weak demand and the strength of price that has peaked at the year-to-date highest level, local traders in China are becoming more cautious. In the meantime, most market players think there is only a limited room for price decreases. In consideration of the high costs, as well as the anticipated arrival of materials into the market, traders are currently active in making deals in the Chinese HRC market.

As for inventory, as of June 15, the HRC inventory in main Chinese cities totaled 4,182,700 mt, decreasing by 27,730 mt as compared to the week before. Particularly, the HRC inventory in Shanghai was 1,474,350 mt, down 5,930 mt week on week

As a whole, the main reason behind HRC price hikes in China is the apparent demand, rather than increased real demand coming from downstream industries. In addition, steel mills' orders haven't showed a substantive improvement. Accordingly, Chinese major steelmakers Baosteel and WISCO have changed their HRC prices only marginally. Since the apparent demand is not stable, the Chinese HRC market is expected to remain vulnerable next week.