Ex-China HRC prices lack firm direction affected by futures fluctuations

Although most Chinese mills and traders have maintained their offers rather stable over the past week, ex-China HRC prices have shown some negative bias affected by fluctuations in local and futures HRC prices. In the meantime, local HRC prices have been showing ups and downs during the past week, and have edged up slightly by Tuesday, May 28, amid more stimulus policies being issued for the real estate sector.

Specifically, offers from big Chinese mills for boron-added SS400 HRC have settled at $540-550/mt FOB, with a midpoint at $545/mt FOB, down by $5/mt week on week. “Most big mills keep offering at $540-545/mt FOB, with only a few heard at higher levels, though, for example, official offers from Benxi Steel are at $570/mt FOB, which doesn’t make any sense,” a market insider said.

In the meantime, smaller mills and traders have been offering their material at $530-540/mt FOB, mainly the same as last week, though trade activity has been extremely slow. In particular, ex-China SS400/Q235 HRC offers in Vietnam have been voiced at $540-545/mt CFR, the same as last week, while a few deals for around 8,000/mt of SAE1006 HRC were done at $560/mt CFR and slightly below at the end of last week.

Furthermore, offer prices for ex-China SS400 HRC in the Middle East have been estimated at $580-590/mt CFR, while sources have reported several offers to Turkey at $575/mt CFR and above, the same as last week, with no fresh deals reported so far.

In the meantime, following the constant ups and downs in domestic HRC prices in China during the past seven days, by Tuesday, May 28, average HRC prices in the Chinese domestic market have moved up slightly amid the improved market sentiments following Shanghai’s issuance of stimulus policies for the real estate sector. In particular, domestic HRC prices in China are at RMB 3,910-4,010/mt ($550-564/mt) ex-warehouse on May 28, with the average price level RMB 16/mt ($2.3/mt) higher compared to that recorded on May 21, according to SteelOrbis’ data.

On May 27, Shanghai issued several policies, including optimizing lending policies, supporting large families with more than two children to buy houses, further lifting restriction clauses on house purchases, and offering certain subsidies to families replacing old housing with new housing, which has positively affected sentiments in the steel market. However, demand for HRC from downstream users has remained slack, weakening the support for prices. On May 28, some coking plants planned to raise the coke prices by RMB 100-110/mt, which will likely bolster steel prices from the cost side in the near future. It is expected that HRC prices in the Chinese domestic market will fluctuate within a limited range in the coming week.

As of May 28, HRC futures at Shanghai Futures Exchange are standing at RMB 3,870/mt ($544/mt), decreasing by RMB 3/mt ($0.42/mt) or 0.08 percent since May 21, while down 0.33 percent compared to the previous trading day, May 27.

$1 = RMB 7.1101