Vietnam’s domestic steel majors Formosa Ha Tinh and Hoa Phat announced an increase of around $80-90/tonne (t) in their monthly HRC prices for May- and early June sales, as reported by SteelMint. The hike in offers was on the back of rising in input costs and imported HRC offers. Despite, a sharp hike in announced offers, preference for domestic HRCs has remained strong against the imported variety.
- Formosa’s HRC (skinpass) is being offered at $930-935/t CIF Ho Chi Minh City (HCMC).
- Hoa Phat, on the other hand, is offering at $910/t CIF basis.
Factors behind higher preference for domestically produced HRCs:
1. Delivery lead time: The lead time difference between domestically procured HRCs and those of imported ones is rather high, which favours the former over the latter. Moreover, Vietnamese buyers wait for domestic supplies to dry up before switching to imported HRCs, SteelMint learned from Veitnam-based sources.
2. Anticipation of increase in offers from China: Against the backdrop of rising cost burden amidst increasing raw material prices, Chinese participants anticipate HRC prices will go up from the current offer levels of $905-910/t CFR Vietnam. This notion has also kept Vietnamese buyers focused on domestic sourcing. A deal was even heard for a small parcel of Chinese HRCs (SS400) booked at similar levels towards the end of the second week of March.
3. Japanese mills maintain offers higher: The Japanese steel majors, having no rush to sell off in the overseas markets, are consistently keeping the offer levels high at around $980/t CFR in the market. The Japanese appetite for exports is low due to improved demand from the domestic industries, including ship-building (a major consumer of hot-rolled products).
4. Rising export offers in the global market: The Vietnamese steel majors have shadowed the price increases heard from mills in countries across the globe. However, a few majors, who habitually export to the Vietnamese market, are eyeing higher realisations from other destinations such as Middle East and Europe. For instance, Chinese mills are offering at $980/t CFR to the Middle East.
Meanwhile Indian mills are actively booking HRCs for export to Europe at elevated prices with each successive deal. Offers heard from Indian mills were around $1,350-1,370/t CFR Europe for May shipments in the previous week.
Showing improved performance, Vietnam’s finished steel production in Jan-Feb’22 reached 5.1 mnt, up 1.6% over the same period in CY’21, while finished steel sales reached 5.01 mnt, up 18.5% y-o-y.
Outlook: Global HRC market sentiments continue to remain mixed at the moment after Covid cases witnessed an increase in China. On the other hand, prices in Europe and other Asian markets continue to move upwards along with rising inputs costs.
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