Trading activity in China’s domestic hot-rolled coil market picked up on Tuesday July 21, with sentiment improving amid the country’s economic recovery.
Domestic***
Eastern China (Shanghai): ۳,۹۰۰-۳,۹۱۰ yuan ($558-560) per tonne, up 20 yuan per tonne
Several Shanghai-based traders told Fastmarkets that trading activity in eastern China had risen during the day in comparison with Monday, with rising futures resulting in some bullishness in the market.
They attributed the gains in the futures market to increased liquidity in the financial markets as a result of the Chinese government’s monetary easing policies, though they said that on a broader scale, China’s continual economic recovery was a factor as well.
The Chinese Ministry of Commerce said on Tuesday that the country’s consumer goods industry would continue to recover, based on available statistics. The country’s retail sales of consumer goods totaled 17.23 trillion yuan in the first six months of this year, down by 11.4% from a year earlier.
This drop is 7.6 percentage points lower than the total for the first three months of 2020, the ministry said.
This coincides with China’s real gross domestic product rising by 3.2% on the year in the second quarter, which was “much better than expected by global financial market participants,” according to a report by Japanese financial services company Nomura.
A Shanghai-based trader said HRC inventory levels in the region remained relatively lower than those in northern and southern China, which indicates stable demand in recent days.
Export***
Fastmarkets’ steel hot-rolled coil index export, fob main port China: $۴۷۵٫۳۹ per tonne, up $0.97 per tonne
Traders estimated that prices of around $475 per tonne fob were the lowest that most major mills were willing to sell HRC at during the day.
Mills’ offers were around $490-500 per tonne fob.
Sources reported a quiet export market for China, though several traders think buyers in Pakistan may soon trade with suppliers in China once they can agree on a price.
A second Shanghai-based trader said his customers in Pakistan were bidding at $492-495 per tonne cfr, which is equivalent to around $472-475 per tonne fob China.
But he is offering HRC to Pakistan at $505 per tonne cfr – equivalent to around $485 per tonne fob China – based on his target margins and the lowest prices that mills are willing to sell at.
Imports have also stalled, with Indian suppliers only willing to sell at a minimum of $465-470 per tonne cfr China. Chinese importers are not willing to pay anything above $455 per tonne cfr China.
Market chatter***
“We have to thank China’s continuous recovery so far, which has helped keep HRC prices high. But we are looking out for any possible near-term downside amid uncertainties in the market. For example, we are keeping an eye on imports that are arriving in China, which are the result of bookings of Indian HRC made by traders in the past few months. The floods along the Yangtze River could also dampen economic growth,” a third Shanghai-based trader said.
Shanghai Futures Exchange***
The most-traded October HRC futures contract closed at 3,787 yuan per tonne on Tuesday, up by 50 yuan per tonne from Monday.
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