Chinese HRC exporters still bullish amid futures gains, stronger currency

Chinese HRC exporters have continued to go higher in their prices this week, given the rising trends of futures and local HRC prices, along with the strengthening of the Chinese currency against the US dollar. However, the increase has not been supported by buyers and most customers have remained on the sidelines, though more attractive offers have not been reported from other suppliers either.

At present, export offers for boron-added SS400 HRC given by major Chinese mills are at $565-580/mt FOB, mainly for January shipment, with the midpoint at $$572.5/mt FOB, up by $10/mt week on week and up $2.5/mt since Friday, November 17. Higher prices are attributed to the stronger national currency along with further rises in the domestic market for HRC and raw materials, iron ore in particular, and the increasing trend of HRC futures prices.

Notably, the Chinese currency has gained more than two percent in the past week to around 7.14 to the US dollar, reaching its highest level in nearly four months, while the big state-run banks have continued to sell dollars for yuans this week, according to sources.

Meanwhile, smaller mills and traders have increased their offers as well to around $550-565/mt FOB, versus $540-550/mt FOB at the end of last week and up by $17.5/mt on average over the past week. The lower end of the range corresponds to ex-China offers for SS400 HRC in Vietnam at $560-568/mt CFR, up by $8-10/mt week on week. Meanwhile, several deals were reported for ex-China Q235 HRC at $555-560/mt CFR at the end of last week, while new offers have risen to levels of $575/mt CFR and above this week. At the same time, according to market insiders, Chinese traders are reported to have sold a few lots of SS400/Q195 HRC at $590-595/mt CFR Turkey, while most offers have been voiced at $595-600/mt CFR. Ex-China SS400 HRC offers in the UAE have been reported at $595/mt CFR, up by $10-15/mt week on week.

In the SAE1006 HRC segment, following a deal for around 10,000 mt at $590/mt CFR India last week, from a mill with a BIS certificate, new offers have been reported at $600-610/mt CFR India this week. Besides, offers for ex-China SAE1006 HRC in Vietnam have been reported at $575-580/mt CFR from traders, while offers from mills have been heard at as high as $600/mt CFR, both for January shipment.

In the meantime, local HRC prices in China have indicated further rises this week, reaching RMB 4,110-4,410/mt ($576-618/mt) ex-warehouse on November 21, with the average price level RMB 107/mt ($15/mt) higher compared to that recorded on November 14, according to SteelOrbis’ data.

According to sources, during the given week, downstream users have continued to conclude purchases of HRC, further consuming inventory and bolstering prices. Meanwhile, raw material prices, including import prices of iron ore and coke, have moved on an uptrend, exerting a positive impact on HRC prices from the cost side. Moreover, it has been announced that in October the increase in China’s social financing amounted to RMB 1.85 trillion ($0.26 trillion), increasing by RMB 910.8 billion year on year, exceeding market players’ expectations and positively affecting market sentiments. However, a wave of cold weather is on the way in China, which may reduce demand for HRC and weaken the support for prices.

As of November 21, HRC futures at the Shanghai Futures Exchange are standing at RMB 4,017/mt ($563/mt), increasing by RMB 66/mt ($9.2/mt) or up by 1.7 percent since November 14, though declining by 0.12 percent compared to the previous trading day.

$1 = RMB 7.1406