Throughout last week, both supply and demand of Chinese domestic hot rolled coil were weak, while stimulus and harsher Covid lockdown policies were offsetting each other. Chinese HRC prices thus saw negligible changes at home and overseas, Kallanish notes.

In Shanghai on Friday afternoon, 5.5x1,500mm Q235 HRC was traded at around CNY 3,850-3,870/tonne ($538-540/t), remaining unchanged week-on-week. On the Shanghai Futures Exchange, meanwhile, the most-traded, January 2023 contract for HRC gained CNY 50/t from Thursday and CNY 28/t on-week to CNY 3,835/t.

Spot prices of Chinese HRC tried to climb twice last week on the back of futures hikes, but sluggish transactions hit sentiment and rapidly erased any increases. Although production is at low levels, reduced demand due to Covid outbreaks has prevented this from pushing up steel prices.

Coking coal and coke prices were also rising and supporting steel values. However, suffering mills are not expected to accept any further cost increases and they also have little room to raise production in winter. Coke will struggle to see another round of price increases after a CNY 100/t hike was concluded last week.

A fresh daily record-high number of new confirmed Covid cases has reversed policy easing as restrictions swept through more big cities including Wuhan and Chengdu. This winter, demand is more likely to be impacted than production, preventing HRC price increases in December.

Export markets were meanwhile lacklustre. Some Chinese exporters lowered their offers after India announced the removal of steel export duties. However, more mills then chose to hold offers steady as they do not expect more buying interest at lower prices, and they want to avoid losing more money.

South American buyers recently booked some quantities of Chinese SAE 1006 HRC at around $550-560/t fob China levels. “I heard the same price level for deals totalling just hundreds of tonnes, and it is still very difficult to sell in larger volumes,” one exporter in eastern China comments.

Limited quotations for January-shipment SAE 1006 HRC were also at around the same levels on Friday. “This means $565/t for Vietnamese buyers and is absolutely not acceptable for them,” one source says.

Kallanish assessed 2mm SAE 1006 HRC at $545-555/t fob China on 25 November, remaining unchanged from the prior week.

As Indian materials re-enter the global market and Vietnamese exporters are willing to sell at lower prices to secure dollars, Chinese HRC is being squeezed out.