After a steady fall in Chinese HRC import offers in July, prices firmed up in August first week on account of production cut by Chinese steelmakers following tougher environmental law pressures.
As per market sources, Chinese steel prices ascended last week owing to slip in supply forecast in the short term. China’s Department of Environmental Protection has directed mills around Beijing to cut down output and few mills were forced to close their production.
About one third of Chinese steel mills do not meet the prescribed environmental standards which require them to either upgrade or renovate their operations.
In order to deal with increasing air pollution, Chinese government imposed a stricter environmental law which came into effect in Jan’ 15. As per the new law, the government can levy unlimited fines or give closure directives to steel manufacturers if they failed to follow the state rules on technological standards, resource use, and waste treatment. This has resulted in increase in compliance costs of steelmakers, who are already dealing with falling profit margins.
Export offers of Chinese steel observed slight increase in first week of August following the ascent in its domestic prices. As per our trade sources, currently, Chinese HRC is being offered at USD 310/MT, FOB China basis and at USD 330/MT, CNF India basis. Last week, the same was being traded at USD 305/MT, FOB China basis and USD 320-325/MT CNF India basis.
Following the Chinese price increase, export offers from countries like Japan and Korea, also saw a slight increase today.
HRC (2.5 mm) Imported Offers as on Aug 3rd’15
| Particulars | Prices in USD/MT | W-o-W |
| CNF India (from China) | 330 | 5 |
| CNF India (from Japan) | 375-380 | 5 |
| CNF India (From Korea) | 375-380 | 5 |
| CNF India (from Black sea) | 360 | 0 |
Source: SteelMint Research
Domestic offers
Although price improvements can be seen in the international market, prices in domestic market are still higher than import offers. In order to deal with cheaper import, it is anticipated that Indian steel giants are likely to lower down their HRC prices by INR 700-1,000/MT. HRC offers are expected to be in the range of INR 32,500/MT (ex-Mumbai) and INR 33,000-33,500/MT (ex-Delhi & ex-Chennai). All prices include excise duty.
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