Chinese HRC exporters target higher prices despite buyers’ resistance

This week, Chinese HRC exporters have been more optimistic with prices higher even though most major buyers keep resisting price hikes amid the slow demand globally. In the meantime, local prices have moved up given the stimulus policies for China’s real estate industry.

Specifically, Chinese producers have decided to increase their official domestic offers for boron-added SS400 HRC to around $540-560/mt FOB, with a midpoint at $550/mt FOB, up by $7.5/mt week on week, which means the prices have rolled back to the levels heard two weeks ago, since mills are now feeling less pressure from the market, although demand has not yet recovered.  The main reason is the rebound in HRC futures prices following the announcement of anticipated stimulus measures in China, particularly for the strengthening of the Chinese domestic property market. “Offers from most mills have been at $540-545/mt FOB levels, including those from Rizhao, Xinyu, HBIS, etc.,” a market insider told SteelOrbis.

In the meantime, the tradable prices for SS400 HRC have settled at $530-545/mt FOB, up by $10/mt on the lower end of the range week on week. The lower end of the range corresponds to ex-China Q235/SS400 offers to Vietnam at around $540-545/mt CFR, up by $5-7/mt week on week, while a few deals have been reported for ex-China Q196 HRC at $530-535/mt CFR. Besides, offers for ex-China SAE1006 HRC have been estimated at $560/mt CFR, versus $555/mt CFR heard last week.

Furthermore, buyers in the Gulf region have reported ex-China SS400 HRC offers at around $585-590/mt CFR, up by $5-10/mt CFR week on week, with freight estimated at $38-45/mt, though offers at $570/mt CFR levels have still been reported in the market this week.  Offers for ex-China Q195 HRC in Turkey have been voiced at $570-580/mt CFR, so far mainly the same as last week.

Ex-China HRC offers in India have been estimated at around $570-575/mt CFR. “One of the large Chinese mills is offering at around $535/mt FOB, which means around $570-575/mt CFR Mumbai, including some margin for the trader, which means not workable for Indian buyers,” a market insider told SteelOrbis.

Meanwhile, average HRC prices in the Chinese domestic market have moved on an overall uptrend amid the improved demand from downstream users and increasing HRC futures prices. Domestic HRC prices in China have settled at RMB 3,890-3,990/mt ($548-562/mt) ex-warehouse on May 21, with the average price level RMB 37/mt ($5/mt) higher compared to that recorded on May 14, according to SteelOrbis’ data.

During the past week, China issued several stimulus policies to boost the weak real estate sector, which have positively affected market sentiments. Against the logic of inflation expectations, ferrous metal futures prices have gradually shifted upward. At the same time, iron ore prices have moved on an uptrend, providing solid support for HRC prices from the cost side. Meanwhile, HRC producers’ previous maintenance works have been completed, resulting in rising outputs, while demand from downstream users has been quite good, bolstering prices. It is expected that HRC prices in the Chinese domestic market will likely edge up in the coming week.

As of May 21, HRC futures at Shanghai Futures Exchange are standing at RMB 3,873/mt ($545/mt), increasing by RMB 102/mt ($14/mt) or 2.7 percent since May 14, while up 0.34 percent compared to the previous trading day, May 20.

$1 = RMB 7.1069