Ex-China HRC prices keep declining amid local and futures price slump

Following a significant decline in ex-China HRC prices last week, this week offers from most mills and traders have continued to show a downward correction given that average HRC prices in the Chinese domestic market have moved down further due to decreasing HRC futures prices.

More specifically, export offers for boron-added SS400 HRC from large Chinese mills have settled at $500-520/mt FOB, with a midpoint at $510/mt FOB, down by $10/mt week on week. Some mills are still holding their official offers at $530-535/mt FOB, down by $5/mt week on week, but these levels are not viewed as reflecting the real market today. Meanwhile, offers from smaller mills have been heard at $490-510/mt FOB, down by $10/mt on the lower end of the range over the past week.

At the same time, offers from Chinese traders for SS400/Q235 HRC have been estimated at $490-510/mt FOB, against $500-510/mt FOB last week. The lower end of the range corresponds to ex-China Q235/SS400 HRC offers in Vietnam at $505/mt CFR, down by $10/mt, while, according to sources, welcome bids have already been voiced at $500/mt CFR. Furthermore, offers for ex-China Q235 HRC in Pakistan have settled at $515/mt CFR, down by $10-15/mt over the past week.

Furthermore, offers for ex-China SS400 HRC in the Middle East have been reported at around $540-550/mt CFR levels, slightly lower as compared to offers last week, though, according to most market insiders, “The workable prices for ex-China HRC should now be higher than $530/mt CFR. Besides, offers for ex-China Q195 HRC in Turkey have been estimated at $540-545/mt CFR, compared to $555-560/mt CFR last week.

In the meantime, domestic HRC prices in China have settled at RMB 3,530-3,640/mt ($496-511/mt) ex-warehouse on October 22, with the average price level RMB 117/mt ($16.4/mt) lower compared to October 15, according to SteelOrbis’ data.

During the given week, HRC producers’ capacity utilization rates have been at relatively high levels, while demand from downstream users has been slack. The one-year loan prime rate (LPR) has been reduced to 3.1 percent, and the LPR for five years or more has been cut to 3.6 percent, both down 25 basis points from the previous month, as announced by the National Interbank Lending Center, while this has failed to give the financial markets a big boost, resulting in cautious sentiments prevailing among market players. It is thought that HRC prices in the Chinese domestic market will likely edge down in the coming week.

As of October 22, HRC futures at Shanghai Futures Exchange are standing at RMB 3,493/mt ($491/mt), decreasing by RMB 110/mt ($15.4/mt) since October 15, while down 0.82 percent compared to the previous trading day, October 21.

$1 = RMB 7.1223