China’s largest mill raises flat steel price up to $76 on bullish market outlook

Baoshan Iron & Steel (Baoshan Steel), the listed-arm of China Baowu Steel Group, has announced a hike in its domestic sales list prices of flat steel for Jan ’21 deliveries.

• HRC price has been raised by RMB 400/t ($61)
• Heavy plate prices have been increased by RMB 300/t ($46)
• CRC and Hot Dipped Galvanized steel prices are up by RMB 500/t ($76)

The prices of the Baoshan works in East China’s Shanghai, the Meishan mill in East China’s Jiangsu, its Qingshan plant in central China’s Hubei, and the Dongshan works in South China’s Guangdong province. Heavy plate prices were increased for the Baoshan and the Dongshan works in South China’s Guangdong province.

Factors driving HRC prices:

1. Hike in Chinese domestic prices- Domestic HRC prices have strengthened on the back of strong futures. Currently, domestic HRC prices are hovering at RMB 4,350-4,380/t (Eastern China) which was around RMB 4,040- 4,060/t (Eastern China) at the beginning of last month.

2. Robust domestic sales- HRC demand from downstream sectors and end-users continued to remain healthy. Meanwhile, limited inventory and strong demand also attributed to the surge in domestic HRC prices. According to China’s Automobiles Manufacturers Association (CAAM), auto sales in Oct ’20 increased by 0.1% to 2,57 mn units.

3. Increased raw material cost as iron ore price hits multi-years high- Monthly average global iron ore fines (Fe 62%) increased to $124/t, CFR China in Nov ’20 against that in last month at $120/t, CFR China. Chinese spot iron ore fines (Fe 62%) increased by around $17/t on a weekly basis and stood at $150.75/t CFR China yesterday. Prices are nearing to nine-year high levels as similar levels were seen in Mar 2012, as per SteelMint data.

These factors can be attributed to higher flat steel prices by the major steel mill. Also, last month, the company raised its flat steel prices by $15 for Nov deliveries on optimistic market sentiments

Outlook- Domestic HRC prices are expected to remain strong in the near term on falling HRC inventories and healthy demand in local markets. Hike in steel futures is also expected to lend support. SHFE May ’21 HRC futures contract increased to RMB 4,348/t today against yesterday’s close of RMB 4,275/t.