Threats of outputs cuts and reduced key policy rates fail to support ex-China HRC offers

Although HRC offers from most Chinese mills have remained relatively stable over the past week, most traders and some producers from China have dropped their export offers for October shipment HRC since threats of production cuts and the recent reduction of key policy rates have not been enough to support prices.

At present, export offers for boron-added SS400 HRC from large Chinese mills have settled at $560-580/mt FOB, the same as last week, though, according to sources, several big mills, such as Shagang, who offered at $570/mt FOB last week, have decreased their offers by $10/mt week on week.

Meanwhile, offers from smaller Chinese mills have been voiced at $540-550/mt FOB, though some mills such as Anfeng have been heard this week with deals in Vietnam at $545/mt CFR or at around $535/mt FOB. Besides, more deals for ex-China SS400 HRC have been reported in Vietnam through traders at $540-542/mt CFR, while new offers have settled at $545-547/mt CFR as of today, August 22. Furthermore, a deal for 2,000 mt of ex-China SS400 HRC was reported in Pakistan at $565/mt CFR at the end of last week, while around 5,000 mt of ex-China materials are reported to have been sold to South Korea at $555/mt CFR.

At the same time, ex-China offers in the Middle East and Turkey have been reported at $570-590/mt CFR and $575/mt CFR, respectively, down by around $5-10/mt over the past week. “China is available at lower numbers in the UAE this week, but we are not booking with China as we aim to supply to the EU, the US, Canada, Australia, etc., who are not accepting Chinese substrate,” one of the UAE re-rollers told SteelOrbis.

In the SAE1006 HRC segment, ex-China SAE1006 HRC offers in Vietnam have remained at $570-580/mt CFR, with several bids reported at $568/mt CFR. Meanwhile, ex-China offers in South America have been heard at $605-615/mt CFR, versus $610-620/mt CFR last week.

Meanwhile, HRC prices in the Chinese domestic market have moved down to RMB 4,010-4,020/mt ($557-558/mt) ex-warehouse on August 22, with the average price level RMB 23/mt ($3.2/mt) lower compared to August 15, amid decreasing HRC futures prices, according to SteelOrbis’ data.

During the given week, the People’s Bank of China (PBOC) announced a cut in the one-year loan prime rate (LPR) by 10 basis points to 3.45 percent, while keeping the five-year LPR stable at 4.2 percent, though the move is not as strong as market players had expected, especially for the five-year rate, signaling the real estate industry may not gain sufficient support from this round of stimuli, which may exert a negative impact on the steel market.

However, the negative impact from the bad weather weakened, indicating demand from downstream users may see a rebounding trend. Moreover, sentiments will improve further as the peak season begins.

As of August 22, HRC futures at the Shanghai Futures Exchange are standing at RMB 3,917/mt ($544/mt), decreasing by RMB 7/mt ($1/mt) or down by 0.18 percent since August 15.

  $1 = RMB 7.1992