Chinese HRC exporters cautiously positive on prices amid increased stimulus hopes

This week, Chinese HRC exporters including both mills and traders have decided to go slightly higher in their new prices to overseas buyers, as cautiously optimistic sentiments have started to appear in the Chinese market amid increased stimulus hopes, with HRC futures prices moving up. However, the trade activity of Chinese exporters has remained limited given the low demand in the main trade destinations. Furthermore, any strong fundamental improvement is still doubtful as, according to market insiders, local and overseas demand is likely to remain weak, with no improvement in supply and demand seen in China due to the traditional lull during the winter season 

At present, export offers for boron-added SS400 HRC given by major Chinese mills are at $495-500/mt FOB for January and February shipments, with a midpoint at $497.5/mt FOB, up by $2.5/mt week on week. Besides, offers from smaller mills have settled at $480-485/mt FOB, against $475-485/mt FOB last week, though, according to sources, more mills have already been targeting $490/mt FOB. “While Chinese mills and traders have been increasing their offers, most buyers’ bids have remained $5-10/mt lower, depending on the destination,” a market insider told SteelOrbis.   

Meanwhile, Chinese traders have decided to go higher as well, pushing the tradable level for ex-China SS400/Q235 HRC to around $485-490/mt FOB, up by $5-10/mt week on week. As a result, ex-China Q235 HRC offers to Vietnam have settled at $502-505/mt CFR, up by $5/mt over the past week, but with buyers’ bids still coming at $495/mt CFR, according to sources. Besides, new offers for ex-China Q195 in Pakistan have been heard at around 508/mt CFR and at around $510/mt CFR for Q235 HRC, up by $5/mt week on week.

Offers from Chinese suppliers the Middle East, the UAE in particular, have been reported at around $525-530/mt CFR for SS400 HRC, up by $5/mt week on week, but no deals have been reported due to the holidays in the region.

In the meantime, average HRC prices in the Chinese domestic market have moved up amid increasing HRC futures prices, reaching RMB 3,590-3,660/mt ($499-508/mt) ex-warehouse on December 3, with the average price level RMB 47/mt ($6.5/mt) higher compared to November 26, according to SteelOrbis’ data.

According to sources, Pan Gongsheng, the governor of China’s central bank, said on December 2 when attending the China Finance Forum in Beijing that China will continue to adhere to a supportive monetary policy in the coming year, including comprehensively using a variety of monetary policy tools, increasing counter-cyclical regulation and control, maintaining a reasonable abundance of liquidity, reducing the financing costs of enterprises and residents. His comments have exerted a positive impact on market sentiments. At the same time, demand for HRC from downstream users has been good as the outputs of the automobile industry and the home appliance industry have indicated steady growth. However, inventory of HRC may increase in the coming period, which would negatively affect prices.

As of December 3, HRC futures at Shanghai Futures Exchange are standing at RMB 3,544/mt ($492/mt), increasing by RMB 73/mt ($10.1/mt) since November 26, while up 1.14 percent compared to the previous trading day, December 2.

$1 = RMB 7.1996