China’s domestic hot-rolled coil prices trended higher on Wednesday June 9 amid a rallying futures market sparked by concerns over the supply of raw materials.
Eastern China (Shanghai): ۵,۵۳۰-۵,۵۵۰ yuan ($865-868) per tonne, narrowing upward by 30-80 yuan per tonne.
The most-traded HRC futures contract on the Shanghai Futures Exchange reached an intraday high of 5,400 yuan per tonne on Wednesday shedding some of the gains to close the day higher by more than 1%.
The gains were driven by concerns over the supply of steelmaking raw materials, a Shanghai-based trader told Fastmarkets.
The futures contracts for iron ore, coking coal and coke all rose for a second day on Wednesday following an announcement by Chinese authorities on Tuesday that they would undertake measures to improve mining safety.
Production curbs on coking plants in some parts of China and operational issues at Vale’s Timbopeba and Alegria iron ore mines in Brazil are also exacerbating the concerns.
Some of the gains experienced by the ferrous complex were reversed on Wednesday afternoon after China’s National Development & Reform Commission, said it would closely monitor commodity price movements and reiterated its resolution to maintain “normal market order” at a work meeting.
The increases emerged despite a raft of data painting a negative picture of downstream demand.
China’s production of passenger vehicles fell for a second straight month in May, due to the sustained global chip supply shortage, according to data from the China Passenger Car Association (CPCA) released late on Tuesday.
The country’s production of sedans, multi-purpose vehicles, sport utility vehicles and minivans stood at 1.62 million units in May, down by 4.7% from April and 2.3% lower year on year.
Meanwhile, the China Construction Machinery Association reported on Tuesday that 26 major producers of excavators had sold 27,220 units in May, down by 14.3% from the same month last year. This is also 41.6% lower than April’s 46,572 units.
Fastmarkets’ steel hot-rolled coil index export, fob main port China: $۹۰۳٫۵۶ per tonne, up by $0.67 per tonne.
The rebound in the domestic market gave support to export prices for HRC. A few trading companies raised their offers slightly during the day. A second Shanghai-based trader issued offers of $910-915 per tonne fob China on Wednesday, compared with $900 per tonne on Monday when HRC futures fell by more than 3%.
But trading activity remained thin amid uncertainties over whether an export tax would be introduced in China for steel products.
There is speculation that a duty of 11% would be imposed on HRC exports from mid-June, but most market participants think there is little likelihood for this to materialize, sources told Fastmarkets.
A third Shanghai-based trader said he had seen supply meant for export being channeled to the domestic market after the Chinese government removed the export tax rebate on some HRC products.
“Steel prices are likely to remain rangebound,” the third trader in Shanghai said. He attributed recent steel price movements to speculation and is of the opinion that there is no upward momentum from market fundamentals.
Shanghai Futures Exchange
The most-traded October HRC contract finished its Wednesday trading at 5,366 yuan per tonne, up by 78 yuan per tonne from Tuesday’s close.
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