A bump in Chinese steel prices, underpinned by government production cuts, has fuelled a rally in global hot-rolled coil (HRC) prices.
This has coincided with a few other supporting factors, such as strong raw materials prices, trade measures and also regional dynamics in the EU, including reduced import supply, although demand remains fundamentally weak in many countries.
The Argus global HRC marker — a composite weighted-average index of key Argus regional HRC prices — has been on an upward trajectory so far this month, rising by $12.33/t from 1 August to $544.75/t on 12 August. According to the index, HRC prices hit bottom on 9 July, reaching $523.13/t.
The rise is primarily the result of Chinese HRC prices bottoming out, with the Argus daily fob Tianjin index reaching the bottom in this cycle at $439/t on 25 June and holding at this level until 2 July, owing to low summer steel consumption in the domestic market and weak seaborne demand.
The market lifted at the start of July because of government incentives to eliminate outdated capacities, and then again in mid-July on production cuts ahead of China’s military parade in September. In the second half of July, a large dam project in Tibet, expected to boost steel demand, propped prices further up.
Firming iron ore and coking coal prices lent support too, amid talks of restrictions to production of coal mines in China. Before the latest rebound in coking coal prices, the Argus fob Australia hard coking coal index reached bottom on 8 July, since when it has increased by $20.10/t to $153.65/t on 12 August. During the same time period, the Argus ICX® 62pc has increased by $8.50/t.
The Chinese steel price increase and the raw materials bump have played a factor in rising global offers, but in Europe reduced import supply, because of a number of trade measures, has incentivised bolder mill increases. Expectations that January supply will be even shorter, owing to the Carbon Border Adjustment Mechanism (CBAM) entering into effect, has strengthened sentiment. The Argus HRC European marker, which is an average of the ex-works northwest EU and ex-works Italy indexes, is up by €28.25/t from 15 July.
In contrast, during the summer months the Argus HRC ex-works US index has bucked the global uptrend, despite spring tariffs propping up the market previously, with the index dropping by $32.75/st between 15 July and 12 August, to yesterday settle at $857/st — its lowest since February. Strong buyer inventories, little need to restock and moderate mill lead times have weighed on prices.
Global steel HRC marker $/t
By Lora Stoyanova
Source: argusmedia.com
