Hot-rolled coil prices increased in China’s domestic market on Tuesday July 6, following gains in futures prices, while market participants continued to digest talks of production cuts.
Domestic
Eastern China (Shanghai): ۵,۵۸۰-۵,۶۲۰ yuan ($864-870) per tonne, up by 80 yuan from 5,500-5,540 yuan per tonne.
The expectation of production cuts at Chinese steel mills in the second half of the year has been increasing, following the emergence of talk that some mills plan to cut production or reduce the procurement of raw materials to prevent their annual output in 2021 from exceeding that of last year, sources said.
The gains in spot prices, however, were smaller than those in futures prices, probably subdued by the continuing low season for demand, a Hangzhou-based trader said.
The spot price premium over the most-traded HRC contract on the Shanghai Futures Exchange for October delivery was just 20 yuan per tonne on Tuesday, compared with 30-40 yuan on Monday, indicating waning upward momentum in the spot market, a Shanghai-based trader said.
Inventories of hot-rolled plate and coil at warehouses across 20 major Chinese cities stood at 1.73 million tonnes as of the end of June – up 60,000 tonnes, or 3.6%, compared with 10 days ago, according to data from the China Iron & Steel Association (Cisa) released at the weekend. The stocks were also 150,000 tonnes, or 9.5%, higher than a month earlier.
Trading in the HRC spot market remained active on Tuesday, even as purchases by downstream users slowed down because of the high end of offer prices.
Export
Fastmarkets’ steel hot-rolled coil index export, fob main port China: $۸۵۸٫۰۷ per tonne, up by $11.44 per tonne.
Export prices followed domestic prices higher, with improving market sentiment prompting mills and trading houses to hike their offers.
A deal was concluded at $897 per tonne cfr Karachi (Pakistan) on Monday, sources said, with the freight from China to Karachi currently about $40 per tonne.
The deal was for July delivery and did not comply with Fastmarkets’ methodology, but traders indicated that $857 fob China would be a tradeable level in the current market conditions.
Market chatter
“Despite the absence of official announcements about production cuts, I see a high likelihood of production reductions in the second half of the year. But the reductions will be gradual and that won’t have a great impact on the current market – so the reaction [in the] prices has been moderate. The market will have to wait until September, when demand picks up in the high season, to see if there is a supply shortage,” the Hangzhou-based trader said.
Shanghai Futures Exchange
The most-traded October HRC contract ended at 5,604 yuan per tonne on Tuesday, up 110 yuan from Monday’s close.
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