China’s domestic hot-rolled coil prices surged on Monday August 3 to reach their highest since October 2018 amid optimism generated by rising manufacturing activity.
***Domestic
Eastern China (Shanghai): 4,060-4,070 yuan ($582-584) per tonne, up 70-90 yuan per tonne
Several Shanghai-based traders told Fastmarkets that trading activity in that region was merely moderate because buyers were reluctant to pay too high for cargoes.
But sellers raised their offers anyway amid a strengthening futures market, which had responded to optimism generated by statistics showing China’s factory activity being at their highest in nearly a decade.
The Caixin/Markit manufacturing purchasing managers’ index (PMI), a private business survey indicating factory activity, rose to 52.8 points in July from 51.2 a month earlier. Markit said its survey showed that operating conditions in China’s manufacturing sector had improved at its quickest rate since January 2011. A reading of above 50 indicates expansion.
China’s official manufacturing PMI was 51.1 points for July, up by 0.2 points from June, according to its National Bureau of Statistics.
One of the Shanghai-based traders who spoke to Fastmarkets said investors were confident with China’s economic recovery amid the Chinese government’s monetary easing policies.
Additionally, relatively low HRC inventory levels in Shanghai have provided prices with additional support, he said.
But the trader warned that prices could drop over the next 2-3 weeks because traders in Shanghai had recently placed large orders with mills in Tangshan – China’s steelmaking hub. These cargoes are scheduled to arrive in eastern China in several weeks’ time.
***Export
Fastmarkets’ steel hot-rolled coil index export, fob main port China: $490.05 per tonne, up $4.16 per tonne
A source at a mill in eastern China told Fastmarkets that it was only considering bids above $505 per tonne fob this week, compared with $500 per tonne fob last week.
This is due to the mill looking to raise its export offers amid the strengthening of China’s domestic HRC market, he said.
Traders said that cargoes priced below $490 per tonne fob were hard to come by. They were largely priced around $485-490 per tonne fob a week earlier.
Trading activity on Monday was thin due to most market participants waiting for mills to update their offers on Tuesday.
A Zhejiang-based trader said some 10,000-20,000 tonnes of Chinese HRC were sold to Pakistan last week at $490-495 per tonne fob, though this could not be confirmed with other traders.
A second Zhejiang-based trader said the highest bid he had received from Pakistan last week was $487 per tonne fob China, for SS400 HRC.
***Market chatter
“Compared with Pakistan, other markets such as Vietnam and South Korea have been quiet recently, partly because the Covid-19 pandemic is worsening in Vietnam. But I’m afraid they will have to pay higher in the next few days if China’s domestic prices remain strong,” the mill source said.
***Shanghai Futures Exchange
The most-traded October HRC futures contract closed at 3,911 yuan per tonne on Monday, up by 63 yuan per tonne from last Friday.
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