Traders in the region have dropped prices in a bold move to sell more cargoes before the currency further loses value.
Some market participants are betting on more price drops, entering into bigger short-selling positions in the past week while trying to boost trading margins.
Other market participants expect more currency devaluations to come while China defends its economy against tit-for-tat tariffs by encouraging exports and cheaper domestic goods. This has allowed bearish sentiment to creep into the US-dollar markets in China and Southeast Asia.
The Metal Bulletin fob China hot-rolled coil (HRC) index began to decline on June 26 once the effects of the yuan’s devaluation were felt across the steel markets. The index fell from $596.25 per tonne fob China on June 25 to $589.69 per tonne fob China on July 3.
Prices in Vietnam, one of China’s biggest markets for HRC, have also fallen, with re-rollers and buyers reducing their bids to $600 per tonne cfr Vietnam in the face of falling offers.
Metal Bulletin’s weekly price assessment for SAE1006 HRC imports in Southeast Asia was $600-615 per tonne cfr for the week ending Monday July 2, widening down from $607-620 per tonne assessed the previous week.
The ample availability of India and CIS-origin materials have exacerbated the price drops.
The Metal Bulletin fob China rebar index started dropping on June 28, similarly after the effects of the devaluing yuan reached the steel markets. The index fell from $558.55 per tonne fob China on June 25 to $552.25 per tonne fob China by July 4.
"We are planning to wait for lower export prices for rebar on the yuan's depreciation," an importer in Southeast Asia said. He received offers at $555 per tonne fob for rebar on an actual weight basis on Wednesday, down $5 per tonne from Monday.
Wire rod export prices showed the largest decreases, dropping $10-15 per tonne to $565-575 per tonne fob China on July 3 from $580-585 per tonne fob China on June 26.
"Some traders are short-selling wire rod cargoes at $565-570 per tonne fob with expectations of further devaluation in the Chinese yuan," a trader in east China said on July 4.
The alleged shortage of China-origin wire rod supply in the region, a result of a crackdown on illegal smuggling, has not bolstered prices either.
Import prices into Southeast Asia have also been affected by the devaluation, with traders dropping their offers to entice buyers. Some market participants have taken a risk and are giving additional discounts on top of mill offers because of the bearish sentiment in the spot market.
Metal Bulletin’s price assessment for wire rod imports in Southeast Asia - which mainly looks at low-carbon mesh-quality material sold into the Philippines and Vietnam from China - was $595-600 per tonne in the week to Monday July 2, down from $600-605 per tonne a week earlier.
Cold-rolled coil, hot-dipped galvanized coil
Export prices for Chinese cold-rolled coil (CRC) and hot-dipped galvanized coil (HDG) edged down, after weeks of remaining at a standstill.
Suppliers lowered their export offers by around $5-10 per tonne from the previous week, sources said. However, the price cuts were not significant because of the support from China’s robust domestic segment.
But even with the reduced offer levels, many overseas buyers were still resistant to procure CRC and HDG from China.
“Many customers overseas are still holding off because they are waiting for further price drops next week,” a Tianjin-based trader said on Tuesday.
Metal Bulletin’s assessment of prices for China export SPCC 1.0mm CRC was $620-625 per tonne fob for the week ended Tuesday July 3, narrowing downward by $5 per tonne on the high end from $620-630 per tonne a week earlier.
Metal Bulletin’s assessment of prices for China export 1.0mm 120g zinc-coated HDG was $690-695 per tonne fob for the week ended Tuesday, narrowing down by $5 per tonne week on week.
The Chinese yuan's recent losses against the US dollar has pressured steel prices in Asia to move down, with continual drops for both flat and long steel products across the region.