Posted on 11 Jan 2021
Production and apparent consumption of hot rolled coil (HRC) in China will increase in 2021, climbing by 6.2% and 4.3% on year respectively, Mysteel predicts in its newly-published forecast report for the product. Prices of hot coils will also show a modest improvement this year, it noted.
For 2021, Chinese production of HRC will very possibly strengthen further from 2020 to reach 259.7 million tonnes, as HRC capacity is expected to expand this year after a net uptick of 2.45 million tonnes/year in hot-rolling capacity for 2020, the report noted. South China will host most of the new HRC capacity coming on stream this year, Mysteel notes.
As for coil demand, China’s apparent consumption of HRC is seen increasing to 256.2 million tonnes this year, given expectations that the global economy will improve once the spread of COVID-19 is more thoroughly contained. This year also marks the first year of China’s fourteenth Five-year Plan and stable consumption will continue to prop up HRC demand as steel end-users respond to new objectives detailed in the new plan. China was the only country realizing positive GDP growth in 2020, Mysteel noted.
Amid potential rises in both supply and demand, Chinese HRC prices are expected to improve in this year’s first two quarters and then to retreat in H2, Mysteel forecasts, but both the peak and trough in prices would be higher than in 2020, so the average price during 2021 will trend higher.
Throughout 2020, HRC prices witnessed a V-shape trajectory. The price of Q235 4.75mm HRC was severely dampened by the demand standstill due to the virus outbreak early in the year, touching the year’s bottom on April 8 of Yuan 3,367/tonne ($516/t). However, during the second half of last year the price significantly recovered to reach Yuan 4,994/t on December 22, a new high since July 2010 when Mysteel first launched the price survey.
Source: Mysteel
As of December 31, the price was assessed at Yuan 4,598/t, some Yuan 733/t higher on year. However, the average price for all of 2020 was roughly stable, compared with the previous year, at Yuan 3,842/t, only Yuan 2/t lower on year.
The determined upsurge in the HRC price in last year’s second half was mainly thanks to the recovery in demand both within China and from abroad, as well as the support hot coils received from strengthening raw materials prices.
HRC demand from domestic machinery manufacturers and the infrastructure industry increased markedly in H2 thanks to Beijing’s supportive policies, while an uptick in demand from container markers was an unexpected source of demand. Sales of excavators and other construction equipment in China totalled 296,075 units over January to November, representing an increase of 37.4% on year, as reported.
Besides, sales of automobiles also saw on-year rises for eight straight months by November, thanks to central and local authorities’ efforts in promoting domestic consumption. HRC sales strengthened as a result as automotive sheet makers lifting production.
In 2020, China’s HRC imports witnessed historical highs, with these being up 140% on year to 7.1 million tonnes over last year’s January-November period, while exports plunged by 34.2% on year to 5.9 million tonnes over the same period.
Last year, China’s HRC market was the first in the steel sector to show a recovery in demand after Q2 when the global pandemic was just taking hold. Meanwhile, though total exports declined last year overall, exports strengthened markedly in the second half amid a resumption of manufacturing industries worldwide. The strong pace of HRC exports will continue this quarter at least, according to Mysteel’s forecast report.
On the other hand, the spread between domestic cold-rolled coil (CRC) and HRC prices ranged from Yuan 300/t to Yuan 1,350/t last year, mainly due to the robust exports of finished goods containing Chinese-made CRC. Manufacturing industries beyond China were severely hit by the epidemic and so to meet improving consumer demand in such countries, a great number of orders were obtained by domestic manufacturers, the report noted.
For example, China exported 3.06 billion units of home appliances over January-November 2020, higher by 12.6% higher on year, according to data from China’s General Administration of Customs.
China’s CRC and HRC price comparison
Source: Mysteel
Mysteel’s expectations for HRC (unit: million tonnes)
|
Production |
YoY (%) |
Imports |
Exports |
Net exports |
Apparent consumption |
YoY (%) |
|
|
2019 |
230.6 |
9.57 |
2.95 |
8.97 |
6.02 |
224.58 |
10.75 |
|
2020 (e) |
244.56 |
6.05 |
7.6 |
6.41 |
-1.99 |
245.75 |
9.43 |
|
2021 (e) |
259.72 |
6.2 |
4 |
7.5 |
3.5 |
256.22 |
4.26 |
Source:Mysteel Global
