China's hot rolled coil demand has remained weak over the past week due to Covid lockdowns, prompting export volumes to be boosted alongside a drop in prices, Kallanish observes.

In Shanghai on Friday afternoon, 5.5x1,500mm Q235 HRC was traded at around CNY 5,200-5,220/tonne ($800-803/t), remaining stable week-on-week. On the Shanghai Futures Exchange, meanwhile, the most-traded October 2022 contract for HRC lost CNY 78/t from Thursday and CNY 124/t on-week to CNY 5,074/t.

End use consumption continued to be affected by logistics problems and shutdowns, while traders and futures companies with spot business were still the main force of consumption in the market last week. Slowly falling prices meanwhile further compressed mill profits.

Prices have however been supported by improving conditions in Shanghai. Auto companies including Tesla have resumed production, which could boost automotive coil consumption soon.

Steel mills and exporters showed great enthusiasm in export markets and were willing to lower prices, due to weak domestic demand and Chinese currency depreciation.

A major steelmaker in eastern China on 15 April sold 100,000t of June-shipment SAE 1006 HRC at $905/t cfr Vietnam, of which the thickness was wholly 2mm. Competitive offers for same product given by other Chinese mills came to the same level one week later.

However, the gap between market participants’ expectations was widening. Some Chinese exporters said the price was “too cheap,” as steel prices are approaching cost and the outlook for demand is supportive.

In the meantime, Vietnamese buyers thought the price is expensive as they would not process the product to coated steel for exports, and the same goes for some Chinese exporters whose confidence has been battered by lockdowns. “Vietnamese buyers even do not accept my quotations below $900/t cfr Vietnam this week,” a source said on Friday.

Kallanish assessed 2mm SAE 1006 HRC at $865-870/t fob China on 22 April, down $27.5/t from a week earlier.