This week, imported HRC offers to Vietnam witnessed a sharp fall of around $40/tonne (t) week-on-week (w-o-w) against the backdrop of a sharp fall in Chinese futures. This fueled bearish sentiments in the Vietnam market which, in turn, led to a sharp drop in offers from major exporting nations.
Current week’s offers-
- Chinese HRC offers were quoted at $1,040-1,050/t CFR Vietnam. Last week, the offers stood at around $1,080-1,090/t CFR basis.
- Position cargoes from India were offered at around $1,070/t CFR basis. However, mills are not actively offering cargo, awaiting clarity on Chinese price trends.
- A Japanese mill quoted offers at $1,150/t CFR basis after a long break.
Reasons behind the downturn in imported HRC offers-
1. Sharp fall in Chinese futures- Chinese domestic HRC prices are falling due to a sharp fall in futures contracts on the Shanghai Futures Exchange.On 24 May’21, SHFE HRC futures contracts closed at RMB5,316/t, down RMB 177/t ($28/t). Thus, domestic HRC prices stood at RMB 5,440-5,450/t (exw- Tangshan, including VAT) a drop around RMB 230/t since Friday, 21 May’21, when prices were at around RMB 5,670- 5,680/t. This sentiment is severely impacting export offers from China.
2. Chinese government intervenes to control higher steel prices- China’s National Development & Reform Commission (NDRC) held a meeting on Monday, 24 May’ 241 with major Chinese companies representing the iron, steel, and non-ferrous sectors, along with several government bodies, to convey that it will investigate thoroughly if these players were suspected of hoarding or driving up prices of commodities. After this meeting, domestic HRC prices started falling, leading to drop in export offers from China.
3. Absence of clarity among end-users- Buyers in Vietnam have no clarity on offers from major exporting nations. Indian mills are not offering HRC to Vietnam. Only traders are selling their position cargoes. South Korean mills have withdrawn offers and Chinese offers are falling sharply. Thus, there is a large gap between bids and offers and no major deals have been concluded yet, “Buyers are not in a rush since Chinese futures and market prices are decreasing sharply. So, no one really knows what exactly are reasonable prices to buy at,” said a market source.
4. Importers trying to reduce dependency on imports- Vietnam steel imports stood at 1.35 mn t, down 6% in Apr ’21 as compared to Mar ’21, according to data published by customs in Vietnam. Meanwhile, steel production also increased by 38% in Jan-Apr ’21. Thus, domestic manufacturers have sharply raised HRC offers since end-users are preferring to procure the material locally.
Near-term outlook-
China majorly drives imported HRC offers in Vietnam. Since China has reduced its offers, all other nations will follow the trend because lower prices attract Vietnam buyers. Thus, imported HRC offers are expected to decline in the near term.
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