The post-Covid-lockdown reopening of Shanghai and improvement in
confidence brought about by stimulus policies have stimulated a significant
rebound in domestic hot rolled coil futures and spot prices. However, low
demand weighed on prices in export markets and transactions were sluggish this
week, Kallanish notes.
In Shanghai on Thursday afternoon,
5.5x1,500mm Q235 HRC was traded at around CNY 4,940-4,970/tonne ($740-745/t),
up CNY 225/t week-on-week. On the Shanghai Futures Exchange, meanwhile, the
most-traded, October 2022 contract for HRC gained CNY 63/t from Wednesday and
CNY 181/t versus last Friday to CNY 4,879/t.
For the rest of the year, purchase
tax reduction policies are forecasted by the China Association of
Automobile Manufacturers to boost annual car sales by 2 million units.
This equates to 9.34% of China’s passenger car sales in 2021. This has raised
market expectations for a June recovery and for a longer-term rebound in
HRC sales.
Pre-Dragon Boat Festival holiday
purchases also partially helped overall HRC inventory to fall again.
Inventories fell by 1.7% on-week to 3.7 million tonnes. Social and mill
inventories were down 0.96% and 3.55% respectively to 2.64mt and 1.05mt, SMM
data show.
Prices dragged in export markets,
however, due to stagnant demand. Quotes for July-shipment SAE 1006 HRC
vary between $775/t and $800/t cfr Vietnam.
Indian offers at similar levels were
also competing with Chinese sellers in a limited market. A deal for
Indian-origin SAE 1006 HRC was concluded at $748/t cfr Ho Chi Ming City this
week (see Kallanish 2 June).
“I could accept the price as long as the customer buys 30,000 tonnes too,” an
exporter in Tangshan tells Kallanish.
Kallanish assessed 2mm SAE 1006 HRC
at $730-740/t fob China on 2 June, down $10/t from last Friday.
However, Chinese exporters
may retreat if the domestic market rally extends for a long period and Indian
mills insist on competing in overseas markets with low prices, under pressure
from export duties