CHINA HRC: Prices weaken ahead of export rebate cut

China’s hot-rolled coil prices fell on Wednesday April 28 after the Ministry of Finance confirmed there would be an export rebate cut, even though inventories continued to drop.

Domestic
Eastern China (Shanghai): 5,720-5,750 yuan ($883-887) per tonne, down 40-50 yuan per tonne

Spot sellers were forced to lower offers amid futures drops, sources told Fastmarkets.

Although the Ministry of Finance announced the cancelation of export rebates for many steel products in the afternoon after the futures market trading had ended, many market participants had been informed of the policy change on Tuesday afternoon, a Shanghai-based trader told Fastmarkets.

China is to cancel some steel export rebates, including HRC, from May 1.

The change in policy will dampen domestic prices because, without the rebate, China’s steel exports will be less competitive and supplies to the domestic market will increase, a second Shanghai-based trader said.

In response, domestic HRC prices fell on Wednesday.

Inventories have drifted down over the past week, with one trading house reporting that major warehouses in Shanghai had a total of 404,100 tonnes of HRC on Wednesday, a fall of 9,700 tonnes from 413,800 tonnes a week earlier.

But the inventory loss was not enough to bolster prices, with the export rebate to be adjusted, a third Shanghai-based trader said.

Export
Fastmarkets’ steel hot-rolled coil index export, fob main port China: $910.97 per tonne, down $1.04 per tonne

A Zhejiang-based trader said Inner Mongolia-based Baotou Iron & Steel had sold 1,000-2,000 tonnes of July-delivery HRC at $905 per tonne fob this week.

He did not disclose the destination, but said that such price would be the lowest in the current market.

Most other major mills were offering HRC at $920-940 per tonne fob, he said.

A Hong Kong-based trader said alongside deals of common grades of HRC, he had heard that some private mills in China were willing to sell rerolling HRC at $930-940 per tonne fob, with some Vietnamese buyers able to accept that price.

A Vietnam-based trader confirmed this and said buyers there had booked several orders for rerolling HRC at $950-960 per tonne cfr Vietnam, from China and India.

All these prices have factored-in the export rebate change.

Market chatter
“Many market participants were well-informed and reacted even before the policy was announced. That caused today’s price loss but, overall, China’s HRC supply-demand relationship is currently healthy,” a second Zhejiang-based trader said.

Shanghai Futures Exchange
The most-traded October HRC futures contract closed at 5,691 yuan per tonne on Wednesday, down by 61 yuan per tonne from Tuesday.

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