In first half of the CY18, HRC prices witnessed slowdown amid subdued demand in domestic market along with reduced exports over imposed regulations. As per survey POSCO GS steel has sold HRC at Won 780,000/MT (USD 698) which witness drop by Won 60,000/MT and reached to WON 720,000/MT (USD 645) in first half of CY18.
Why HRC prices in South Korea moved down in H1 CY18 ?
1. Falling demand from automobiles & home appliances sector – Demand from automobiles and home appliances have adopted a policy of minimizing the purchases of Hot rolled material in starting of the year.This turned large scale projects into small caps and thus increasing the stock of HRC in market.These factors contribute in declining HRC prices.
2. Reduced export volumes – Exports of HRC continued to be on lower side post imposition of USA tariffs on Korean HRC.As per market reports exports of domestic hot-rolled steel mills such as POSCO and Hyundai Steel down by 7% Y-o-Y basis in first half of CY18. USA has imposed tariffs on Korean Hot rolled coils.This has become the major obstacle for major Korean companies to export HRC to global market.
Korean mills have increased their domestic sales volumes by 14% in first half of CY18 to 41.1 MnT in order to offset decline in export volumes.Major mills in domestic market are trying to expand their market share but change in market strategies has made domestic market saturated.
Forecast for H2 CY18-
1. Demand may remain sluggish over reduced consumption– As per reports demand in domestic market may remain sluggish in second half of CY18.In first half of CY18 the nominal consumption (domestic consumption +imports) stood at 6.59 MnT,down by 10% against H2 CY17.
2. Automobile production is likely to remain down-According to POSRI (POSCO Research Institute) hot rolled coils required in the production of automobiles is likely to reach 2 Million 5000 units in second half of CY18,lower by 47,000 units against H1 CY18 .In last three consecutive years the trend of automobile production witness plunge owing to maintenance and restoration of factory equipment coupled with dull demand in export and domestic demand.
3.Export volumes of household appliance may shrink-Market of household appliances remained weak owing to sluggish demand in domestic market along with reduced exports.Also US safeguard measures and factory relocation will shrink export volumes in near term.
Thus,it will be interesting to know that will Korean HRC prices sustain or shall decline further amid weak demand in domestic market and restricted exports to global nations.
~Inputs from Steel Daily
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