Vietnam: Imported HRC offers continue uptrend on stronger economic recovery

Imported HRC offers continue to witness price rally and have reported a further increase by $10-20/t this week. Tight supplies, active trades and robust demand among end-users prompted exporting nations to raise offers significantly for Vietnam buyers.

The current week offers for imported HRC from China elevated to $700-720/t CFR Vietnam from $690-700/t CFR basis towards the beginning of previous week.

There were unconfirmed reports of a Chinese mill concluding HRC deal at around $690/t CFR basis for Jan-Feb shipments. The deal was heard to have concluded towards end of last week, however confirmation could not be received till the time of publishing this report.

SteelMint identifies a few key points for a significant hike in prices:

1.Increased demand in downstream products - Vietnam being the major galvanized and color-coated exporter witness hefty demand for imported HRC. This prompted buyers in Vietnam to procure material at higher prices. Hoa Phat Group registered a sharp growth of 135% y-o-y at 16,900 t galvanized coil supplies to the market, as per Vietnam Steel Association (VSA).

Vietnam & Thailand emerged as the only countries in ASEAN -6 continue to see positive growth in their construction activities in Q3 CY'20 with 5.7% and 10.5%, respectively, as per SEAISI.

2.Domestic supplies yet to match up with demand - Major domestic players mainly Formosa Ha Tinh and Hoa Phat are facing a shortage of HRC supplies in the domestic market due to increased demand. Thus Vietnam mills are shifting their focus to imports at higher prices.

3.Lower export allocations - With the limited export allocations from countries like India, Russia, Japan, and South Korea amid improving demand and better realizations in the domestic market, there is a significant gap created in the supply side in the global HRC market.

4.Higher raw material cost- The price of raw materials for steel production such as iron ore and scrap steel has soared in the past three years and set a new price mark in November, which affected prices in Vietnam, reported the Vietnam Steel Association (VSA). Imported scrap offers to Vietnam have jumped by $40-45 w-o-w, as per data maintained with SteelMint.

Outlook- Imported HRC offers to Vietnam continue to remain supported on higher global offers and ample demand from end-users. Also, the absence of Indian cargoes and premium offers from Japan, and South Korea may continue to keep prices elevated in Vietnam .