Mood among Chinese HRC exporters worsens amid lower futures prices

Ex-China HRC prices have remined relatively stable during the past week though with some downward bias in some offers and even in deals, while more cheaper ex-China non-VAT offers have also been reported in the market this week. Furthermore, sentiments among Chinese HRC exporters have been worsening this week due to the slack local demand from downstream users and decreasing HRC futures prices.

More specifically, export offers for boron-added SS400 given by major Chinese mills have settled at $535-550/mt FOB, with a midpoint at $542.5/mt FOB, down by $7.5/mt week on week, though, according to sources, a number of mills have been offering their materials at $535/mt FOB, while some are still offering at $560/mt FOB. “We feel that Chinese mills are keeping raw material prices up so they can keep finish product prices up as well, but we see a very unclear market trend in the coming days,” an international trader told SteelOrbis.

In the meantime, the tradable prices have been voiced at around $520-545/mt FOB, compared to $530-550/mt FOB last week, with the lower end of the range corresponding to non-VAT offers to Vietnam. According to sources, while ex-China SS400 HRC offers with VAT have been heard at $560/mt CFR, offers from non-VAT traders have been reported at $530-535/mt CFR, down by $10/mt week on week, with a few deals reported at the abovementioned level at the end of last week and beginning of this week. Meanwhile, offers for Q195 HRC have settled at $540/mt CFR with VAT, while without VAT the same material has been sold at $530/mt CFR, according to sources. “In Vietnam, mills expect that prices in the upstream market will still be strong since production costs of mills are rising, even though global demand for steel is still unchanged,” a representative of a Vietnamese mill told SteelOrbis, adding, “About non-VAT materials, there has still been a lack of information, since the market is very quiet for this product.”

Furthermore, initial offers for ex-China SS400 HRC in the UAE have settled at $575-585/mt CFR, down by $5/mt on the lower end of the range over the past week. Besides, market insiders have reported several deals from tube makers concluded at $561-570/mt CFR levels.

In the meantime, average HRC prices in the Chinese domestic market have moved on an overall downtrend amid the slack demand from downstream users and decreasing HRC futures prices. In particular, domestic HRC prices in China are at RMB 3,840-3,960/mt ($541-558/mt) ex-warehouse on May 14, with the average price level RMB 60/mt ($8.5/mt) lower compared to that recorded on May 7, according to SteelOrbis’ data.

During the given week, though China’s Ministry of Finance (MOF) issued arrangements relating to the issuance of general treasury bonds and ultra-long special sovereign bonds in 2024, aiming to support the real economy, cautious sentiments have still prevailed among market players. Inventory of HRC has been at relatively high levels, exerting a negative impact on prices. Stock consumption has been slow, weakening the support for HRC prices. It is thought that HRC prices in the Chinese domestic market will likely fluctuate within a limited range in the coming week.

As of May 14, HRC futures at Shanghai Futures Exchange are standing at RMB 3,771/mt ($531/mt), decreasing by RMB 93/mt ($13/mt) or 2.4 percent since May 7, while down 0.84 percent compared to the previous trading day, May 13.

$1 = RMB 7.1053