Ex-China HRC offer prices improve slightly amid futures gains

Although uncertainty continues to surround Chinese HRC prices given the ongoing weakness of steel demand and the general quietness of overseas buyers, sentiments have improved on Tuesday, September 24 as HRC futures gained more than RMB 100/mt ($14/mt) after the Chinese government’s announcement of a positive stimulus policy. Thus, Chinese exporters have followed suit, increasing their offers slightly, though most market insiders still believe that the price increase is temporary and that Chinese suppliers will maintain the positive sentiment until the Chinese national holiday in the first week on October. 

More specifically, export offers for boron-added SS400 HRC from major Chinese mills have been estimated at $460-470/mt FOB, with a midpoint at $465/mt FOB, up by $2.5/mt week on week. “Some say export offers from a few big mills have been voiced at $480/mt FOB, but this price is totally impossible. Nobody will accept it, at least for now,” a Chinese trader told SteelOrbis. 

At the same time, offers from smaller Chinese mills and traders have been estimated at around $458-460/mt FOB, against $450-455/mt FOB last week. In particular, according to sources, this morning offers for ex-China SS400/Q235 HRC were reported at $465/mt CFR, while by the afternoon most suppliers have increased their prices to $475/mt CFR Vietnam. “Yesterday bids for Chinese HRC were at $458/mt CFR. Today they are at $472/mt CFR,” a Vietnamese trader said. Furthermore, offers for ex-China SS400 HRC in Pakistan have been voiced at $490-492/mt CFR, up by $5-10/mt week on week. 

Meanwhile, offers for ex-China SS400 and Q195 HRC to the Middle East and Turkey have been estimated at $460/mt FOB, or around $500-505/mt CFR Turkey, up by $10/mt week on week, and at around $510/mt CFR UAE, up by $5/mt over the past week.

Average HRC prices in the Chinese domestic market have seen increases amid rising HRC futures prices and the PBOC’s announcement of the reserve requirement ratio (RRR) for Chinese banks being cut by 0.5 percentage points in the near future. Domestic HRC prices in China are at RMB 3,200-3,290/mt ($454-467/mt) ex-warehouse on September 24, with the average price level RMB 36/mt ($5.1/mt) higher compared to that recorded on September 19, according to SteelOrbis’ data. 

During the given week, after the US announced an interest rate cut of 50 basis points, the People’s Bank of China also announced that it will cut the reserve requirement ratio (RRR) for Chinese banks by 0.5 percentage points in the near future, which exerted a positive impact on HRC prices. At the same time, market players will build up certain stocks ahead of the National Day holiday (October 1-7), which will bolster HRC prices firmly. It is thought that HRC prices in the Chinese domestic market will edge up in the coming week. 

As of September 24, HRC futures at Shanghai Futures Exchange are standing at RMB 3,300/mt ($468/mt), increasing by RMB 51/mt ($7.2/mt) or 1.6 percent since September 19, while up 3.48 percent compared to the previous trading day, September 23. 

$1 = RMB 7.051