Ex-China HRC prices relatively stable ahead of holiday, more deals reported in Asia and Middle East

This week, Chinese HRC exporters have not been in a hurry to increase their offers for overseas buyers even though domestic prices have been showing a slight upward movement over the past week. Trade activity has remained moderate, with most deals heard through traders mainly to the Middle East and Asia, while buyers in other destinations have been more cautious in terms of purchases. At the same time, although local HRC prices have been showing some rises this week, the overall expectations for the post-holiday period are rather mixed, and some are even pessimistic as outputs of HRC have indicated increases, while in February widespread snowy and rainy weather may continue to hit China.

More specifically, export offers for boron-added SS400 HRC from most large Chinese mills have settled at $580-590/mt FOB, mainly for March shipment, the same as last week. However, a few offers from mills, such as from Benxi Steel, are still voiced at as high as $600/mt FOB.

At the same time, offers from smaller mills and traders for SS400 HRC have been heard at $565-575/mt FOB, up by $5-10/mt on the higher end of the range week on week. However, most buyers’ bids are still voiced at $560/mt CFR and even lower in Vietnam. In particular, while ex-China SS400 HRC offers have been estimated at $565-570/mt CFR Vietnam, the same as last week, several bookings for Q195/Q235 HRC have been reported at $563/mt CFR, with offers standing at $565/mt CFR, the same as last week. Meanwhile, most ex-China SAE1006 HRC offers in Vietnam have remained at $605-610/mt CFR, with bids below $600/mt CFR. According to sources, talk about a deal for Chinese origin SAE1006 HRC signed at $585-595/mt CFR Vietnam has been circulating in the market, but this information has been denied by most market insiders by the time of publication.

Furthermore, while offers for ex-China Q195/SS400 have been heard at $580-590/mt CFR Pakistan, a deal for ex-China SAE1006 HRC has been reported at $620/mt CFR. Besides, another deal for around 15,000 mt of ex-China SAE1006 HRC is reported to have been signed in Bangladesh at $620-625/mt CFR.

Following several deals for ex-China HRC in the Middle East at around $615/mt CFR last week, this week another deal for 15,000 mt is reported to have been signed with UAE buyers through an international trader at $615-620/mt CFR. According to market insiders, ex-China SS400 HRC offers from traders have been voiced at $590-600/mt CFR, though some sellers have started to go higher this week, offering at above $600/mt CFR level.

In the meantime, average HRC prices in the Chinese domestic market have continued their uptrend amid slightly increasing inventory levels and improved apparent consumption. Particularly, domestic HRC prices in China have settled at RMB 4,090-4,280/mt ($576-603/mt) ex-warehouse on January 30, with the average price level RMB 17/mt ($2.4/mt) higher compared to that recorded on January 23, according to SteelOrbis’ data.

During the given week, import iron ore prices have indicated a fluctuating trend at relatively high levels, providing solid support for HRC prices. At the same time, though the Chinese New Year holiday (February 9-16) is drawing closer, inventory of HRC has seen slight rises, while demand has improved to a certain degree as some buyers have been building up stocks ahead of the long holiday. However, the output of HRC has indicated increases, which may exert a negative impact on prices in the near future. Most market participants will likely leave the market by the end of this week, which will slacken the demand for HRC. Moreover, widespread snowy and rainy weather is hitting China, which will also negatively affect the HRC market. It is thought that HRC prices in the Chinese domestic market will move sideways in the coming week.

As of January 30, HRC futures at the Shanghai Futures Exchange are standing at RMB 4,044/mt ($570/mt), decreasing by RMB 5/mt ($0.7/mt) or down by 0.1 percent since January 23, though decreasing by 1.39 percent compared to the previous trading day (January 29).

$1 = RMB 7.1117