China's HRC prices may witness uptrend in short run

Boosted by an expected reduction in market supply in July, China's hot-rolled coil (HRC) prices will witness a rise in the near term, Mysteel chief analyst Cao Jianyong, told delegates attending the 2023 Chinese HRC Industry Chain Conference held in Shanghai on June 16.

Eased pressures from the supply side will be a major reason for the domestic HRC prices trending upward in the short run, Cao expected, saying that more steel producers are expected to start conducting maintenance works on their steelmaking facilities in July, compared to June.

Meanwhile, Cao predicted the total HRC output of 37 Chinese flat steelmakers under Mysteel's tracking to fall by 7.3% on year to 278.29 million tonnes for the whole year of 2023. While these monitored mills' hot-rolling capacity utilization rate will sit at 76.13% this year, 3.45% higher from 2022.

On the demand side, domestic HRC orders from downstream are likely to improve modestly in July, with end-users showing more willingness to replenish their HRC inventories in the month compared to the first half of this year.

"So we don't need to be over-pessimistic about the hot coils demand though China's steel industry still face headwinds amid the traditional off-season for steel consumption," he said.

The prices of China-origin hot coils have tracked an inverted V-shaped path through January to May. For example, Mysteel's assessment of the national price of Q235 4.75mm HRC retreated by Yuan 676/tonne ($97.9/t) on month to settle at Yuan 3,747/t by May 31 after gaining Yuan 275/t from January 3 to hit Yuan 4,423/t by March 31.

In particular, Cao forecasted that China's domestic HRC prices are likely to keep fluctuating in rangebound after brief rebounds in the near term, mainly on the back of improved market fundamentals and expected policy stimulus.

Written by Carly Chen, chenziyi@mysteel.com, Winnie Han, hanyueran@mysteel.com
Edited by Alyssa Ren, rentingting@mysteel.com

Note: This article has been written in accordance with an article exchange agreement between Mysteel Global and SteelMint.