Chinese mills have lowered HRC export offers significantly after they turned active for exports following a sharp cut in domestic offers. Imported HRC offers for Vietnam from China’s leading mills like Benxi, Rizhao Steel etc are currently assessed at $515/t CFR Vietnam which was around $535/t CFR basis a week ago. Few position cargoes trades were reported at $515/t CFR levels, however, the quantity couldn’t be confirmed till the time of publishing the report.
Notably, Russian offers also fell down by $15-20/t w-o-w to $510/t CFR basis as compared to $525-530/t CFR basis offered a week ago. The Russian Ruble fell further against the dollar today and hit 79.02 mark on increasing COVID cases. However Indian steel mills continue to remain inactive in the Vietnam market.
Imported HRC offers continue to drop due to:
1. Weakening Chinese domestic prices- Domestic prices in China continue to witness a decline by RMB20/t w-o-w basis and is hovering at RMB 3,820- 3,840/t (Eastern China) which was around RMB 3,840-3,860/t (Eastern China) towards beginning of last week. Prices mentioned above include 13% VAT. Drop in domestic prices resulted in softening of export offers. Also China’s all time high production and increased inventories leads to bearish sentiments in domestic and export market.
Additionally, fall in futures is another reason which resulted in price decline. SHFE HRC Jan’21 contract closed at RMB 3,669/t today against RMB 3,730/t in mid-Sept’20. However, a slight increase in futures has been seen recently due to stocking ahead holidays.
2. Upcoming week long holidays- Chinese mills are going for an eight days public holiday to mark the national day of the People’s Republic of China. This is expected to keep market sentiments on the bearish side.
3. Increased domestic supply in Vietnam to restrict hike of imported offers – Vietnam’s integrated steel manufacturer – Formosa Ha Tinh has increased the production of base grade HRC (SAE1006) on improved demand from end-users. Also, towards the end of Sep’20 – Hoa Phat steel in Vietnam commenced its HRC sales in the local market. This may lead to increased domestic HRC availability in Vietnam which may restrict import offers from increasing.
Outlook- Imported HRC offers expected to remain weak in the near term ahead of National day holidays in China. Also end users are not preferring Russian cargoes on longer period deliveries.
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