Domestic hot-rolled coil (HRC) prices in China extended their gains on Monday August 23, buoyed by constrained production but subdued by rising inventories and persistent concerns over demand.
Domestic
Steel hot-rolled coil domestic, ex-whs Eastern China (Shanghai) was 5,660-5,700 yuan ($870-876) per tonne, up by 30-40 yuan per tonne from Friday August 20.
The most-traded HRC contract on the Shanghai Futures Exchange gave back most of its earlier gains on Monday, after hitting an intraday high of 5,535 yuan per tonne in early afternoon trade.
High stocks, the absence of a substantial demand recovery from the summer lull and demand concerns sparked by Covid-19 situations across the globe – as well as dismal economic indicators – limited upside potential in steel prices. Constrained production, however, offered support, a Shanghai-based industry analyst said.
Inventories of hot-rolled coil and sheet across five major Chinese cities stood at 1.94 million tonnes as of August 20, approaching the earlier 2021 peak of 2 million tonnes reached in late February, according to data released on Monday from the China Iron and Steel Association. The number was up by 20,000 tonnes or 1.0% from 10 days ago and by 170,000 tonnes or 9.6% higher than in the same period last year.
Market participants are still weighing production curbs against demand concerns, leading to recent fluctuations in steel prices, a Tianjin-based trader said.
Export
Fastmarkets’ steel hot-rolled coil index export, fob main port China was $908.75 per tonne, up $1.25 per tonne from August 20.
The export index remained stable on Monday; trading houses’ offers and estimates of workable levels for transactions were largely unchanged amid thin trading liquidities.
A large, privately-owned mill in east China will remain out of the export market this week.
Some trading houses continued to indicate that $900-920 per tonne fob might be workable levels for SS400 HRC transactions.
Offers from mills, meanwhile, stood above $950 per tonne fob, which is not competitive in the international market.
High prices, coupled with lingering fears of an introduction of export duties, jeopardized the appeal of Chinese materials in the export market, sources said.
Market chatter
“We will wait and see whether the Chinese tax authorities will announce flat steel export duties this week,” a Shanghai-based trader said. “We might have a clearer direction for our trading strategies and for setting offer prices after the end of August.”
Shanghai Futures Exchange
The most-traded January HRC contract ended at 5,464 yuan per tonne on Monday, up by 6 yuan from last Friday’s close.
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