Posted on 23 Mar 2018
Chinese exporters have kept hot-rolled coil (HRC) offer prices to southeast Asia largely stable this month, despite slow offtake from the region’s largest buyer Vietnam, as other suppliers have been priced out of the market.
Vietnam is one the world’s largest importers of HRC and has effectively become a clearing house for surplus stocks in major Asia-Pacific producers such as Japan, South Korea, China and India.
The Argus-assessed cfr Asean HRC price has fallen by 2.5pc this month to $618.20/t yesterday.
But there have been few offers from non-Chinese suppliers this month, as prices from those exporters have been $30-50/t higher than Chinese offers on a cfr basis. The lack of competition has made Chinese steel exporters confident enough to largely maintain offer prices, despite slow domestic demand. Mill margins in China have fallen by a third since December but are expected to recover as construction demand increases in the spring and summer.
A proposed 25pc import tariff on steel imports into the US comes into effect tomorrow, which could divert additional supplies to Asia and challenge Chinese control of the Asean HRC export market. It is still unclear which countries will be covered by this duty, with close US allies Japan and South Korea expecting to win exemptions. But if the tariff is imposed on these two countries, it could encourage them to seek alternative markets for some of their US sales, although it remains to be seen whether exporters in Japan and Korea would make deep cuts in offer prices to match Chinese levels.
Indian suppliers are unlikely to return to the market soon as domestic demand remains robust on the back of government infrastructure spending. But the onset of monsoon rains in May usually slows construction activity, pressuring steel prices, which could led to more aggressive export offers.
A small parcel of Japanese HRC with May shipment traded at $665/t cfr Vietnam in the first week of March. Indian-origin HRC offers were at $660-670/t cfr last week but did not attract much buying interest.
Offers for May-shipment Chinese HRC with grade of SAE1006 were unchanged at $625-630/t cfr Vietnam yesterday, while offers for the SS400 grade were at $590-600/t cfr.
Chinese mills are unwilling to cede margins to make sales in a market they are already dominating, rejecting firm bids for SAE1006 HRC at $615/t cfr Vietnam this week. Mills are also wary of cutting offer prices too much, as Vietnamese buyers would then bid aggressively lower.
