Ex-China HRC prices remain stable after holiday, but mood more negative than positive as futures decline

Chinese HRC suppliers have finally returned to the market this week from the long Chinese New Year holiday. However, most of them have been rather confused in terms of new price policies, given the worse mood in the domestic and futures markets along with bearish sentiments among other HRC suppliers globally. Meanwhile, smaller mills and traders have been even more cautious as regards new offers, with several deals reported at lower levels through traders in Vietnam.

More specifically, 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 before the holiday, two weeks ago. “Mills are confused as HRC futures prices have been dropping too fast during the last two days, while interest from buyers is very limited globally,” a market insider told SteelOrbis.

Meanwhile, the tradable level for SS400 HRC from Chinese suppliers has been estimated at $545-560/mt FOB, down by $5/mt over the past two weeks. According to sources, while offers for ex-China SS400 HRC have been heard at around $550-560/mt CFR, down by $5-10/mt, while a few deals for Q235 HRC have been reported at $550/mt CFR, against $554-556/mt CFR reported at the beginning of February. At the same time, offers for ex-China SAE1006 HRC from one of the first-tier mills have been voiced at $600-605/mt CFR, mainly the same as two weeks ago.

Offers for ex-China SS400 HRC in the Middle East from the first-tier mills have been heard at $615-620/mt CFR, while from the second-tier mills at $595/mt CFR, according to sources. Besides, offers for Q195 HRC in Turkey have been reported at $595/mt CFR, the same as before the holiday.

In the meantime, following the Chinese New Year holiday, local demand for HRC from downstream users has not improved yet, while inventories have been at relatively high levels, exerting a negative impact on its prices. At the same time, a wave of cold weather is hitting China, which may limit the recovery of demand. Thus, domestic HRC prices in China have settled at RMB 4,040-4,170/mt ($569-587/mt) ex-warehouse on February 20, with the average price level RMB 17/mt ($2.4/mt) lower compared to that recorded on February 6, according to SteelOrbis’ data.

On February 20, the People’s Bank of China (PBoC) announced a cut in the five-year loan prime rate (LPR) by 25 basis points from 4.2 percent to 3.95 percent, aiming to bolster the real estate market, which may positively affect the HRC market in the near future. However, iron ore futures prices saw a big decline of 5.41 percent on the same day, weakening the support for HRC prices from the cost side.

As of February 14, HRC futures at the Shanghai Futures Exchange are standing at RMB 3,884/mt ($547/mt), decreasing by RMB 83/mt ($11.7/mt) or 2.1 percent since February 6, though decreasing by 2.29 percent compared to the previous trading day (February 19).

$1 = RMB 7.1068