Chinese HRC prices dip after demand concerns negate support from Indian export duties
China’s hot-rolled coil prices dipped on Monday May 23, with market sentiment subdued by persistent concerns over demand
Eastern China (Shanghai): 4,800-4,820 yuan ($720-723) per tonne, down by 20 yuan per tonne
The most-traded HRC contract on the Shanghai Futures Exchange slipped to an intraday low of 4,687 yuan per tonne during afternoon trading on Monday, after jumping to a two-week high of 4,842 yuan per tonne earlier in the morning.
The morning jump came along with across-the-board gains in ferrous futures after market sentiment was boosted by India’s imposition of export duties on iron ore and steel intermediates, market participants said.
The Indian government imposed hefty export duties on steel, steelmaking raw materials and intermediaries on May 22. Iron ore and iron ore pellet are now subject to export duties of up to 50%.
A duty of 15% will be imposed on Indian exports of flat-rolled products of iron or non-alloy steel in widths of 600mm or more. Products subject to the tariff include hot-rolled, cold-rolled and coated steel. Some long steel and stainless steel are also now subject to a 15% duty having faced zero export duties previously.
India’s new tariffs will indirectly support China’s steel market, but sustained weakness in domestic demand is limiting any immediate upside in Chinese steel prices, an industry analyst in Shanghai said.
The high season for spot steel is coming to an end, but the market is still struggling with the Covid-19 pandemic, which has painted a poor picture for steel fundamentals so far in the first half of the year, the analyst added.
Fastmarkets’ steel hot-rolled coil index export, fob main port China: $752.37 per tonne, down by $1.38 per tonne
Larger Chinese mills were offering SS400 HRC at $760-780 per tonne fob China, while came in at $730-740 per tonne fob China, sources told Fastmarkets.
A major mill in eastern China set its offer at $780 per tonne fob China this week, down by $20 per tonne from last week, but some mills continued to refrain from issuing offers, preferring instead to wait for bids from buyers.
The export market remained quiet on Monday, most likely because the sustained weakness in futures kept market participants cautious, a trader in Hangzhou said.
“The HRC market is struggling with high inventories, while there are no signs of a significant reduction in supplies. [China’s domestic] HRC prices are expected to remain weak in the short term,” a second industry analyst in Shanghai said.
Shanghai Futures Exchange
The most-traded October HRC futures contract closed at 4,731 yuan per tonne on Monday, down by 39 yuan per tonne from last Friday’s close.