China: HRC prices fall to 2-years low on subdued buying, increasing inventories

Chinese spot prices for carbon-steel hot-rolled coils reached a 2-year low last week, chiefly because of the gloomy sentiment prevailing in the market, according to market sources.

For example, the price of Q235 4.75mm HRC under Mysteel’s assessment slumped by Yuan 505/tonne ($74.8/t) on week to Yuan 3,788/t including the 13% VAT as of July 15.

With the plunge in HRC prices on the Shanghai Futures Exchange last week, most traders trimmed their offering prices for spot coil. Besides, with the continuous fall in HRC prices most end-users have taken a cautious stance regarding buying, with most staying on the sidelines rather than procure, a Shanghai-based analyst said.

Meanwhile, most traders were willing to cut their offering prices to facilitate sales, given their high stocks at hand, another Shanghai-based analyst said, noting that in any case, spot HRC prices will be dampened by the higher stocks at the commercial warehouses, as more HRC will be delivered by mills.

Last week, production of hot coils among the 37 Chinese steelmakers under Mysteel’s survey declined for the second week, down by 7,300 tonnes or 0.2% on week to 3.1 million tonnes over July 7-13, while their rolling capacity also slipped by 0.19 percentage point on week to 79.68% as of July 13.

Meanwhile, HRC inventories held by these surveyed mills also reversed up from one week of decline, rising by 2,600 tonnes or 0.3% on week to 896,500 tonnes as of July 13. In parallel, stocks at trading houses across 132 Chinese cities under Mysteel’s survey increased for the second week by another 94,800 tonnes or 3.4% on week to 2.8 million tonnes as of July 14.

Chinese spot HRC prices might move in the range of Yuan 3,600/t-Yuan 3,700/t including the VAT this week, the first analyst predicted, as demand from end-users remains sluggish when supplies from mills are hovering at a relatively high level.

Written by Villanelle Xia, xiayi@mysteel.com

Note: This article has been published in accordance with an article exchange agreement between Mysteel Global and SteelMint.