Ex-China HRC prices soften further, but buyers insist on even more discounts

This week, another downward correction in hot rolled coil (HRC) export prices has been seen in China given the lack of support from the domestic market and the continuous declines in HRC futures prices. However, despite the drop in prices, trade activity has been rather moderate, while most buyers have been bidding at lower levels.

At present, export offers for boron-added SS400 HRC given by major Chinese mills have settled at $520-530/mt FOB, with a midpoint at $525/mt FOB, down by $5/mt week on week, while smaller mills have reduced their offers to $510-520/mt FOB. “Officially, a number of big mills, like Benxi Steel or Shagang Rizhao, are still offering their materials at $530/mt FOB, but deal prices are not exceeding $515/mt FOB now,” a market insider told SteelOrbis.

Thus, tradable prices for SS400 HRC have dropped to $505-515/mt FOB, versus $515-525/mt FOB last week, where the lower end of the range corresponds to deal prices in Vietnam and India, while the higher end corresponds to offers in the Middle East. More specifically, ex-China Q235/SS400 HRC offers have settled at $518-520/mt CFR Vietnam, against deals at $525-527/mt CFR last week, while, according to sources, this week several deals have already been reported at $516-518/mt CFR levels in Vietnam. Furthermore, around 40,000 mt of Chinese SAE1006 HRC were sold in Vietnam at $540-545/mt CFR last week, while new offers have been voiced mainly at $545/mt CFR this week, down by $5-10/mt week on week.

At the same time, offers for ex-China HRC in India have declined to $530-535/mt CFR, down by $10-15/mt over the past week. According to sources, following several ex-China HRC deals signed in India at $545-550/mt CFR without duty last week, several new deals have been reported this week at $530-535/mt CFR, excluding 7.5 percent duty, though no official confirmation has been provided by the time of publication.

Meanwhile, offers for ex-China SS400 HRC in the UAE have been reported at $550-565/mt CFR, versus $560-570/mt CFR last week, while offers for Q195 HRC in Turkey have settled at $550-560/mt CFR for August shipment, down by $10-15/mt week on week, though no new deals have been reported so far.

Average HRC prices in the Chinese domestic market have indicated sharp decreases amid sluggish demand from downstream users due to heavy rains and high temperatures in China. In particular, domestic HRC prices in China are at RMB 3,750-3,850/mt ($527-540.5/mt) ex-warehouse on June 25, with the average price level RMB 63/mt ($8.8/mt) lower compared to that recorded on June 18, according to SteelOrbis’ data.

During the given week, cautious sentiments have prevailed among market players due to the traditional offseason. Heavy rainfalls have resulted in floods in many regions of China, negatively affecting the HRC market. At the same time, demand for HRC has remained sluggish due to the high temperatures. Moreover, HRC futures prices have moved on a downtrend, also weakening support for the spot market. It is expected that HRC prices in the Chinese domestic market will edge down in the coming week.

As of June 25, HRC futures at Shanghai Futures Exchange are standing at RMB 3,721/mt ($533/mt), decreasing by RMB 70/mt ($10/mt) or 1.85 percent since June 18, while down 0.23 percent compared to the previous trading day, June 24.

$1 = RMB 7.1225