Mysteel Global: China’s hot-rolled coil (HRC) market is expected to come under mild pressure this month, with marginally higher output and softer demand weighing on sentiment, Mysteel’s latest monthly report on the commodity suggests. However, limited supply growth may help prevent any sharp price declines, it suggests.
For April, China’s spot price of Q235B 4.75mm HRC in Shanghai under Mysteel’s assessment may stay flat at around Yuan 3,375/tonne ($464/t) including the VAT on average, down by just Yuan 3/t on month, the report estimates.
Demand for Chinese HRC is expected to weaken to some extent both at home and abroad this month, the report warns.
Domestically, HRC consumption is likely to decline slightly as the manufacturing sector enters a traditional off-season during summer, with end-user industries such as automobile and home appliance manufacturers expected to scale back HRC procurement.
For example, during this month the scheduled production of China’s three most popular home appliances- air-conditioners, refrigerators and washing machines, is estimated to ease by 2.2% from March to total 39.59 million units, according to ChinaIOL.com, a leading domestic information provider serving the home appliance and refrigeration industries.
Meanwhile, the outlook for exports remains subdued in April as trade cases targeting China-origin coils are rapidly increasing. For example, since March, Vietnam – China’s largest steel consumer – has imposed provisional anti-dumping duties on Chinese-origin HRC, and while many Chinese mills and traders have responded by adjusting product specifications and export strategies, these efforts may only partially offset the impact, the report notes.
In addition, a blizzard of U.S. trade actions targeting multiple countries is expected in April, further clouding the global trade environment and potentially weighing on China’s steel exports, including HRC.
On the supply side, improved mill margins, resulting from lower raw material costs, and relatively low inventory levels at hand are likely to encourage steel mills to maintain their pace of production in April, which may lead to a modest increase in HRC output.
However, with capacity utilization for HRC production during the March-April period is already predicted to nearly reach a five-year high so that room for further output growth appears limited, the Mysteel report indicated.
Over March 20-26, the hot-rolling capacity utilization rate among the 37 Chinese flat steel producers that Mysteel regularly tracks averaged 82.86%, according to the latest survey findings.
Moreover, with uncertainties surrounding overseas HRC consumption, in the short term the extent to which mills divert molten steel from drawing rebars to rolling hot coils is not seen as being substantial, the report adds.
Average HRC output among the 37 sampled HRC makers is estimated to rise by just 7,000 tonnes or 0.2% on month to average 3.21 million tonnes per week in April, the report predicts.
Note: This article has been written in accordance with a content exchange agreement between MySteel Global and BigMint.
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