Chinese HRC export prices, trade rise amidst trade tensions

Chinese export prices of hot-rolled coils (HRC) have strengthened significantly recently, reflecting the spikes in international steel prices and improved overseas demand, market sources observed on March 3.

On that day, the export price of SS400 4.75mm HRC was assessed by Mysteel at $846/t FOB from North China's Tianjin port, up $8/t on day or $44/t on week.

The rises mainly followed the trend in the global steel market, the sources said, because China's domestic market demand remained lukewarm.

In the EU, the third largest destination for Chinese steel exports after the ASEAN region and South America, leading steelmaker ArcelorMittal had announced to raise its HRC price to euro 1,150/t ($1,284/t) effective March 1, up euro 180/t from its previous offer in the European market, according to Mysteel's tracking.

The price jumps were mainly due to concerns over rising energy prices and reduced supplies of steel and steelmaking raw materials from Russia and Ukraine, amid the ongoing tension between the two countries, market sources noted.

Both countries are major suppliers of energy, iron ore and coal to the EU while Russia is the world's second largest steel exporter - with 40%-50% of its steel output being shipped abroad every recent years in general. In 2021, the country exported around 31 million tonnes of steel products, consisting mainly of HRC, steel semis and long products, according to a recent Mysteel study.

"Though China's HRC exports are mainly to ASEAN and Chinese shipments to the EU are limited, the reduction in hot coil exports from Russia and Ukraine mean that buyers in ASEAN countries need to compete with EU for the limited supplies from other places such as India and Turkey," a Shanghai-based steel analyst observed. "This drove up ASEAN steel prices and the region's demand for Chinese products," she added.

Consequently, "HRC export sales have improved significantly in recent days after the weakness we saw in February," she said. "In fact, even some small steel exporters who used to complain about poor trading are reporting robust sales these days," she pointed out.

Nevertheless, even though exporters can enjoy higher profits these days compared with selling into the domestic market, some state-owned Chinese steel mills are hesitating to boost their export business, noting the central government's clear determination to discourage the export of commercial grade steel items.

"I am afraid that the government may soon roll out some policies aimed at containing the (export) trend, such as the imposition of new export taxes," an official from a North China mill said, arguing that the surges in steel exports are against Beijing's goal of reducing the steel industry's carbon emissions and stabilizing iron ore price movements.

"The news of the Russia-Ukraine conflict and its impact on trade are overwhelming and are pushing up iron ore prices to unreasonable highs," he said. "If domestic steel prices continue to jump, this will cause more damage to the steel end-using sectors. This seems to me very dangerous," he commented.

Written by Olivia Zhang, zhangwd@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.