Vietnam buyers continue preferring domestic HRC over imported

Vietnam re-rollers continued to prefer domestic HRC over imported material offered from major exporting nations. Attractive offers from domestic steelmakers, namely Hoa Phat and Formosa Ha Tinh, shifted the focus of re-rollers from imported HRC. However, the resurgence in Covid-19 infection cases and the arrival of the monsoon in South East Asian countries are keeping overseas trade a bit slow.

Buyers are preferring domestic HRC due to the following reasons:

1.Domestic offers enticing buyers: Lower offers from the domestic mills like Formosa and Hoa Phat shifted buyers' preference to domestically produced HRC.Hoa Phat's HRC offers stand around $1,018-1,022/t CIF basis for Jul'21 shipments. Formosa is offering HRC (skin passes) at $1,032/t CIF, and non-skin passes at $1,027/t CIF for Jul'21 deliveries.

2. Unclear price direction from China: Chinese offers saw an increase over anticipation of the imposition of the export tax by the government. The Beijing government is keen to put a leash on production volumes to achieve its two main targets - lowering carbon emissions and curbing excess steel production capacities. On the other side, the Shanghai Futures Exchange (SHFE) HRC futures Oct contract closed at RMB 5,170/t ($800/t), lower by RMB 177/t ($27/t) against last closing on 18 Jun'21. Thus, due to unclear price direction and weaker demand amidst approaching monsoon, buyers are less likely to purchase HRC from China.

3. Higher imported offers: Major HRC exporting nations are offering the material to Vietnam at elevated levels. Offers for the current week are -

• Chinese mills are offering at $990-1,050/t CFR levels against $985-990/t CFR a week back.
  
  
• Russian major,MMK, resumed offers at $1,100/t CFR after a long gap.
  
  
• Japanese HRC offers stand around $1,150/t CFR.
  
  
• Indian mills' price indications are being heard at around $1,000/t CFR.
  
  

4.Resurgence in Covid dents overseas trade: The re-emergence of Covid-19 in the form of new strains and the arrival of the monsoon season in the South East Asian region weighed on demand of imported HRCs. An increase in Covid cases pushed mills to procure material locally instead of importing the same

Near-term outlook- Vietnam re-rollers are likely to continue buying domestic HRC for the time being due to continued uncertainty on export tariff adjustment expected to be announced by the Chinese government. Also, Indian and Chinese origin cargoes are at higher prices and there is a disparity between bids and offers which will keep buyers away from the imported market.