Asian hot-rolled coil prices plunged May 24, as sentiment in China turned extremely bearish amid certainty of demand slowdown in domestic markets with buy-side in Southeast Asia faced with low priced Chinese cargoes.
Platts assessed the SAE1006 HRC at $775/mt FOB China during the Platts Market on Close assessment process, down $14/mt on the day. The same grade of the coil was assessed down $10/mt during the same period at $768/mt on a CFR Southeast Asia basis.
SS400 HRC of 3 mm thickness was assessed at $735/mt FOB China, down $7/mt from April 22. The same grade of coil was assessed down $10/mt during the same period at $740/mt on a CFR Southeast Asia basis.
For SAE1006 re-rolling coils, market participants highlighted offers for Chinese-origin coils at $770-$780/mt CFR Vietnam, with prices seen softening through the day, with buyers completely sidelined. The reason for bearish sentiment largely emanated out of a combination of factors, primary amongst which was the concern around low Chinese demand, amid increase in COVID-19 cases around Beijing. The city reported 99 cases for May 22, up from 61 on May 21. While the total is still low, the spike is one of the biggest since the outbreak started, with the case tally mostly hovering around 50 a day, media reported.
The bearish sentiment was despite critical announcements made by China’s State Council meeting chaired by Premier Li Keqiang on May 23. Measures to support the economy included additional tax rebates to companies, cuts of 60 billion yuan on passenger car purchase taxes, doubling of quota for loans aimed at small and medium-sized enterprises as well as extending companies' social-insurance contributions to the end of the year.
“The policies the government announced are failing to inspire any confidence as long as the COVID-19 situation isn’t resolved and lockdowns continue...domestic prices are still falling…have hit lowest prices seen this year,” a Shanghai-based trader in reference to 33 measures announced May 23 aimed at stabilizing the Chinese economy and a return to normalcy.
Sources told Platts that Chinese mill Anfeng showed proclivity to conclude deals at lower levels with traders inviting bids for SS400 HRC from the mill at $740/mt CFR Vietnam. At the same time, mills like Benxi and Anshan were heard to be “hungry for orders” with tradable levels heard at $745/mt FOB, according to sources.
In Shanghai, the Q235 5.5 mm HRC spot price was assessed at Yuan 4,700/mt ($705.18/mt) ex-stock, including value-added tax, down Yuan 100/mt on the day. On the Shanghai Futures Exchange, the most actively traded October 2022 contract closed at Yuan 4,609/mt, down Yuan 122/mt or 2.6% over the same period.
Meanwhile, uncertainty around Indian mills’ strategy around handling existing orders – mostly to Europe and Middle East - post imposition of 15% export duty announced May 22 persisted. According to a few traders, some mills have conveyed proclivity to bear the entire burden of export duty, in order to maintain customer relationships; however, none of the mills have confirmed the same.
“Mills are hoping for the government to give them some time to execute current orders. However, the thinking is that all old orders (booked in April) should be executed even by paying the duty,” a Mumbai-based exporter said.
“They [Indian mills] will have to pay the duty under protest for ongoing shipments, and then make a case for refund [from the government],” a second Mumbai-based exporter said. “They are shipping coils worth $1350-$1370/mt CFR EU. If they ask buyers to bear the [export] duty, buyers will be happy to cancel.”
Mills were also heard to be deliberating on exporting alloy-added HRC for future orders. Vietnam re-rollers could accept boron-added HRC from India, similar to China, as long as mills are able to control boron in the limitation range, sources said.
