Posted on 07 Nov 2024
Relatively tepid demand and slow supply growth will likely cause Chinese hot-rolled coil (HRC) prices to fluctuate this month, with macroeconomic policies becoming the key variable, Mysteel's latest monthly report on the flat product suggests.
Domestic HRC prices performed strongly in early October in response to the economic stimulus measures announced by the central government in late September, but coil prices soon retreated as the temporary optimism faded, the report observed.
During October, China's spot price of Q235B 4.75mm HRC in Shanghai under Mysteel's assessment had climbed by 11.3% on month to average Yuan 3,532/tonne ($493.5/t) including the VAT.
As November began, important macroeconomic developments at home and abroad continued to capture most steel industry attention in China, the report noted, citing key events such as the crucial NPC Standing Committee meeting in Beijing during November 4-8 and the upcoming US Federal Open Market Committee meeting.
In particular, this week's pivotal NPC meeting has raised the hopes of domestic steel industry market participants for further economic incentive policies that may invigorate the steel sector, as reported.
Chinese HRC prices may not gain strong momentum but just fluctuate this month under fundamental pressures, Mysteel's report indicated.
On the one hand, steelmakers are likely to divert more hot metal away from producing coils to other steel products such as rebar that promise better returns.
By end-October, the profits on making HRC among steel mills in East China averaged Yuan 37/t, while their gains when selling rebar stood at Yuan 187/t, according to Mysteel's tracking.
Average HRC output per week in November might slip by 0.3% on month to reach 3.05 million tonnes, Mysteel's report predicted. Resilient domestic HRC demand from the manufacturing sector could offset some of the pressure from declining overseas demand, it said.
For example, scheduled domestic production during November of the three most popular home appliances in China – namely air-conditioners, refrigerators and washing machines – is expected to rise by 9.5% on month to 31.35 million units, according to ChinaIOL.com, a leading domestic information provider for the home appliance and refrigeration industries.
Another factor likely to influence domestic market conditions for hot coils this month is the trend in exports which, till now, have been relatively strong, the report notes. However, Chinese mills are facing increasingly strong headwinds in their steel export businesses through the rising tide of trade cases targeting China-origin carbon and special steel exports, it warns.
For example, within this month Vietnam's Ministry of Industry and Trade is expected to announce the preliminary results of a dumping probe into imports of Chinese and Indian HRC launched in July in response to a petition lodged by Vietnam's two leading flat rolled steel producers, Hoa Phat Group and Formosa Ha Tinh Steel Corporation, as reported.
Vietnam is a major buyer of Chinese HRC and the imposition of heavy antidumping penalties could severely impact Chinese HRC exports there which could boomerang back on domestic market conditions, sources say.
Source:Mysteel Global
