Market: China's HRC price under stress in H2, Q3 stable
Source: Mysteel
Jun 27, 2018 17:24
China’s hot-rolled coil (HRC) price is expected to hover at a high level for the third quarter of this year, as the remaining strong demand and high profit margin will ease mills and traders’ concern upon rising supplies, though the pressure will be persisting in general in the latter half of 2018, market sources agreed.
China’s HRC prices will likely stay at Yuan 4,050-4,150/tonne ($614-629/t) including the 16% VAT over July-September, according to Hu Sainan, Shanghai-based Mysteel flat steel analyst predicted at the 3rd China Ferrous Derivatives International Conference in Shanghai on June 21.
“China’s domestic HRC market seems to be perfectly balanced this year, and most of the Chinese HRC mills would be keen to maximize their output for the rest of the year to achieve the most profits,” she elaborated.
A steel trader from Changzhou city, East China’s Jiangsu province, shared the overall optimism, adding, though, “I believe the HRC price to soften a bit in July due to Sino-US trade friction and a slight rebound in steel stocks, but later on, it will stay at the high level for the second half.”
In China, the profit margin for HRC increased sharply by 77% or Yuan 520/t on year to Yuan 1,191/t as of June 22, according to Mysteel’s calculation based on a series of market survey.
Robust domestic steel market will most probably see declines in China’s HRC exports amid high offering prices, according to market sources, and China’s HRC export offering price was at $605/t FOB as of June 22, or up 32% or $145/t on year.
For H2, however, China’s HRC market will be under persistent pressure.
“I think China’s HRC prices will be still under the downward pressure in the latter period of this year if the market demand can’t absorb the added supplies,” a flat steel trader in Hangzhou city, East China’s Zhejiang province, said Wednesday.
A steel trader in Southwest China’s Yunnan province, agreed, suggesting that traders should consciously control their stocks at a reasonable level so as not to add further downward pressure on the domestic steel prices.
In the first half of this year, China’s HRC market was with rises in output, prices while declines in stocks, which led to handsome margins to the producers, and as a result, China’s weekly HRC output hit a nearly three-year high at 3.4 million tonnes during May 28-June 1, up 160,000 tonnes or 4% on month, according to Mysteel data.
On the other hand, China’s HRC inventories at 33 major cities and 37 steel producers had been declining for 12 consecutive weeks since March 9 to a total of 2.89 million tonnes as of June 1, or 872,000 tonnes or 23.2% lower than a year ago.
China’s HRC rolling capacity is expected to total nearly 300 million tonnes/year by the yearend, 2018 from 92 rolling mills nationwide, among which ten have been newly-commissioned, boasting a combined 29.3 million t/y capacity, according to Hu.
Another three new HRC lines may be on stream after 2019, or adding on another 14.5 million t/y, according to Mysteel’s survey.
Written by Rebecca Zhu, rebeccazhu@mysteel.net.cn
Edited by Hongmei Li, li.hongmei@mysteel.com
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