Posted on 23 Sep 2020
Recent CIS hot rolled coil export price hikes have been sustained, but the possibility of a softening is on the horizon.
Buyers have pulled back in the wake of China's iron ore futures and physical HRC price declines in the past week. They are likely to remain out of the market until Chinese activity resumes on 9 October after almost two weeks of Golden Week holiday, market sources tell Kallanish.
Having sold October-rolling tonnages at $500-515/tonne fob Black Sea, it appears all but one Russian mill have no October rolling tonnages left. The mill with tonnages is becoming short of options other than selling at lower prices, or waiting longer until China is back, traders say. Its offers still stand at around $500-510/t fob Novorossiysk. However, increasing competition in Far Eastern markets mean offers have to be at a maximum of $500/t fob Far East to compete with Chinese material offered aggressively by traders (see separate article).
Indeed, traders concede Chinese HRC price reduction in the past week by around $15/t to $515-520/t fob China has spooked some buyers off. The one-month iron ore forward curve is meanwhile in backwardation of around $10/t, further stoking fears. "Thus far we are approaching the lowest levels of the ongoing price corridor in both HRC and iron ore in China,” one major trader says. “There are expectations of a quiet couple of weeks during the holidays, but from 12 October we expect activity to resume.”
Another adds: "We expect lowering inventories and export resumption will ultimately produce a rebound in prices once the Golden Week is over."
While China’s market is undergoing what many perceive as a technical correction, European demand remains strong. But the only CIS supplier able to sell to Europe claims most of its tonnage is sold in the domestic market, with a small share distributed in northern Europe. European traders are mindful of the "second wave" of Covid-19 and the possibility of renewed restrictions, which "…nobody can afford the second time around,” they say.
Meanwhile, Turkey’s market looks set to continue providing a staple source of sales, especially with shorter lead times. Prices have plateaued at around $535/t ex-works, making tentative offers at $515-520/t cfr Turkey a slightly overpriced but not impossible alternative, traders say.
Source:Kallanish
