Chinese mills’ HRC export prices stable ahead of holiday, traders' prices drop due amid local and futures price declines

This week, most big Chinese mills have rolled over their export prices, while, according to sources, some of them have already stopped giving orders switching to holiday mode. Meanwhile, only some traders have remained active, though with lower offers in short positions, as sentiments have worsened among market players this week following the sharp drops in futures and local prices in China. As a result, the tradable level has decreased by around $12.5/mt as compared to traders’ offers last week.

At present, export offers for boron-added SS400 HRC given by major Chinese mills are at $580-600/mt FOB mainly for April shipment, the same as last week. According to sources, most producers have already stopped giving offers due to the approach of the Lunar New Year holiday in China, as well as due to worsening sentiments in the market amid the recent declines in HRC futures prices, which affected price ideas from overseas customers.

Meanwhile, following a slight increase in HRC export offers seen at the beginning of last week, at the beginning of this week signs of falling prices have emerged in the market as Chinese traders have started to cut their offers given the sharp falls in futures prices. Thus, the tradable levels for ex-China SS400 HRC has settled at $550-565/mt FOB, against $565-575/mt FOB at the beginning of last week and compared to $560-570/mt FOB on Friday, February 2. The lower end of the range corresponds to offers for Asian buyers, while the higher end represents offers to distant market, including the Middle East and Turkey.

At the same time, according to sources, some offers from non-VAT Chinese traders have been heard at even lower levels in Asia, in Vietnam and Pakistan in particular. Offers for ex-China SS400 HRC in Vietnam have been estimated at around $565/mt CFR, down by $5/mt on the higher end of the range week on week. However, several bookings for ex-China Q195/Q235 HRC for around 4,000 mt in total have been reported at $554-556/mt CFR for March-April shipment, down by $7-9/mt week on week. At the same time, offers from Chinese traders for SAE1006 HRC have been heard at $585-595/mt CFR, against offers at around $600/mt CFR last week, though no deals have been reported so far.

Furthermore, customers from Pakistan have reported a few bookings for ex-China SS400 HRC at $564/mt CFR, against offers at $580/mt CFR last week.

Meanwhile, average HRC prices in the Chinese domestic market have moved on a downtrend amid rising inventory levels and declining HRC futures prices. Domestic HRC prices in China have settled at RMB 4,050-4,180/mt ($570-589/mt) ex-warehouse on February 6, with the average price level RMB 74/mt ($10.4/mt) lower compared to January 30, according to SteelOrbis’ data.

During the given week, imported iron ore prices have seen decreases, weakening the support for HRC prices in the spot market. At the same time, as the Chinese New Year holiday (February 9-16) is getting closer, the demand for steel has been very slack. Most downstream users and traders are on holiday, which will exert a negative impact on the HRC market. It is expected that HRC prices in the Chinese domestic market will remain stable in the coming period and will likely edge up following the long holiday amid the anticipated improvement in demand.

As of February 6, HRC futures at the Shanghai Futures Exchange are standing at RMB 3,967/mt ($559/mt), decreasing by RMB 77/mt ($11/mt) or 1.9 percent since January 30, and down 0.18 percent compared to the previous trading day (February 5).

$1 = RMB 7.1082