Vietnam: Falling Chinese offers, low buying interest keep imported HRC prices under pressure

• Imported HRC offers drop to over-a-year low
  
  
• Buying interest continues to remain low
  
  
• Buyers eye price announcement from domestic manufacturers
  
  

Limited buying interest in imported hot rolled coils (HRCs) in Vietnam has pulled down export offers from major countries, especially China, to a-year's-low. Also, Vietnamese buyers are now waiting for domestic mills' price announcement for September and early-October sales due in the upcoming week.

HRC (SAE1006) offers from major exporting countries:

• China: $650/t CFR from tier II mills, down $30/t w-o-w. Closer to $655/t assessed on 1 February, 2021.
  
  
• India: $660-670/t CFR, down $10/t w-o-w. This is close to the $650/t CFR assessed on 3 December 2020.
  
  
• Russia: $610/t CFR, unchanged against last week.
  
  

Factors weighing on preference for imported HRCs:

1. Chinese export offers drop sharply following decline in futures: Chinese HRC export offers have fallen today after a drop seen in the futures market on growing fears of weakening demand for the raw material in top steel producer, China, where multiple cities are enforcing fresh Covid-19 curbs. The benchmark HRC futures on the Shanghai Futures Exchange (SHFE) settled at RMB 4,092/t, dropping by RMB 125/t ($19) against last week's close.

2. Subdued overseas demand for Vietnam downstream products: Demand for HRCs has been slow in the Vietnamese market lately. With the European Commission bringing Vietnamese-origin hot-dipped galvanised (HDG) into country-specific quotas, demand has been dented further.

3. Fall in sales of domestic players: Vietnamese integrated steel major Hoa Phat's steel sales stood at around 560,000 t in June, down by 15% against 660,000 t in May. Low buying interest and inclusion of value added-HDG products in EU's country-specific quotas have been among the major factors impacting sales. In H1CY2022, the sales volumes aggregated to about 4 mnt, as per the company's press release.

Considering the current downtrend in imported HRC offers, and cooling global HRC prices, Vietnamese buyers continue to remain glued to domestic procurement. Moreover, the seasonal impact of the south-east monsoons shall keep demand subdued in the country. Also, getting into the second week of July, buyers are now awaiting price announcements from domestic manufacturers who generally do so around 10th-to-15th of every month.