China’s domestic hot-rolled coil prices surged on Monday April 26 to reach their highest since July 2008, after local authorities in Tangshan, the country’s steelmaking hub in the northern region, ordered steelmakers to limit production rates to curb emissions until Tuesday.
Eastern China (Shanghai): ۵,۷۴۰-۵,۷۸۰ yuan ($884-890) per tonne, up 150-170 yuan per tonne
Several Shanghai-based traders said sellers were motivated to issue high offers due to a strengthening of the futures market in response to the Tangshan government ordering mills to suspend their sintering equipment.
That is to help curb pollution in northern China, it said in a document issued on Sunday.
Steelmakers that are already enjoying profit margins of 1,000-1,300 yuan per tonne for some time – especially private mills – will likely benefit further once prices continue their ascent, a trader in Shanghai said.
Fastmarkets’ steel hot-rolled coil index export, fob main port China: $۹۰۸٫۰۵ per tonne, up $27.46 per tonne
A Zhejiang-based trader said the cheapest Chinese HRC he could get was that sold by a private mill in northern China. The mill is asking for 5,750 yuan per tonne, which is equivalent to about $908 per tonne fob.
Most major mills have issued higher offers. A source at Shagang Group said it was asking for $930 per tonne fob and that there was little room for negotiation.
A second Zhejiang-based trader said that a second mill in northern China had issued offers at $940 per tonne fob.
Few buyers in Vietnam are able to pay such prices, sources said. But South American buyers might book cargoes at these levels amid limited supply, they said.
Some traders have already placed orders for July-delivery HRC from a few mills in northern China last week at $930 per tonne fob on expectations that prices would rise higher.
These prices have factored in a possible reduction of the country’s export tax rebate, which has been the talk of the market in the last few months. Market participants had been talking about the possibility of the 13% rebate for HRC being reduced to 9% or 4% or even removed completely.
There was still no official word on the matter at the time of writing.
While Vietnamese buyers could secure cheaper cargoes from stockists in the past few weeks, that is no longer the case now, a second Shanghai-based trader said. This is because bonded warehouses in China are almost fully booked and traders have nowhere to place their inventories.
Market chatter ***
“China’s HRC prices could surpass 2008’s record highs if investors are willing to go long in the steel sector. Policies to control production rates are motivating investors to do so,” a Hong Kong-based trader said.
Shanghai Futures Exchange ***
The most-traded October HRC futures contract closed at 5,737 yuan per tonne on Monday, up by 147 yuan per tonne from last Friday.
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