Hot-rolled coil prices in China extended their losses on Wednesday September 1 due to persistent concerns over demand and waning cost support.
Domestic
Eastern China (Shanghai): ۵,۶۵۰-۵,۶۷۰ yuan ($874-877) per tonne, down by 50-60 yuan per tonne
Spot prices dropped along with the extended decline in futures prices. The most-traded HRC contract on the Shanghai Futures Exchange fell for a second consecutive day on Wednesday, giving back all the gains it made on Monday.
Demand concerns are the main factor limiting upside potential in steel prices, a Shanghai-based trader said. Market concerns over demand have increased following the release of August’s Purchasing Managers’ Index (PMI).
The official manufacturing PMI released on Tuesday pointed to a slower expansion in China’s factory activity in August, while the Caixin manufacturing PMI released on Wednesday fell into contractionary territory for the first time since May 2020, dropping to 49.2 from 50.3 in July.
The poor data, coupled with shrinking new orders and new export orders, indicates that China’s economy is under pressure, sparking concerns over demand for steel and weighing on steel prices.
Waning cost support was another headwind, with the most-active iron ore contract on the Dalian Commodity Exchange slipping for a third straight day on Wednesday, a Beijing-based analyst added.
Despite extended losses in prices, trading activity for spot HRC in the domestic market failed to improve on Wednesday, sources reported.
Export
Fastmarkets’ steel hot-rolled coil index export, fob main port China: $۹۰۷٫۳۷ per tonne, down by $2.63 per tonne
The index continued to inch lower on Wednesday due to some trading houses lowering their offers by another $5 per tonne following recent losses in domestic prices.
Trading liquidity for Chinese material in the export market remained thin because prices are not competitive compared with offers for Russian and Indian material.
Traders were offering SS400 HRC at $910-950 per tonne fob, while offers from mills stood at $950-1,000 per tonne fob.
Workable levels for transactions came within a wide range of $890-940 per tonne fob based on the levels buyers from different regions can accept, according to indications from some traders.
Indian HRC was offered at $910 per tonne cfr Vietnam by traders, while mills were heard to be offering cargoes at $925 per tonne cfr Vietnam. But spot demand remained thin.
News of major blast furnace-based producer Formosa Ha Tinh Steel sealing its factory gates and keeping workers within factory grounds as part of Covid-19 prevention measures did not spook sentiment, because “production remains as per normal,” a Vietnamese trader told Fastmarkets.
Market chatter
“While the long-awaited export duties were not imposed on September 1, concerns linger and our negotiations with customers are still slow,” a Hong Kong-based trader said. “The less competitive prices are the major issue.”
Shanghai Futures Exchange
The most-traded January HRC contract ended at 5,492 yuan per tonne on Wednesday, down by 72 yuan from Tuesday’s close.
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