This report is part of the S&P Global Commodity Insights’ Metals Trade Review series, where we dig through datasets and digest some of the key trends in iron ore, metallurgical coal, copper, alumina, and steel and scrap. We also explore what the next few months could bring, from supply and demand shifts, to new arbitrages, and to quality spread fluctuations.
The Asian hot-rolled coil, rebar and ferrous scrap markets are likely to see limited upward movement in prices in the fourth quarter, similar to Q3, held back by inflation-induced low end-user demand, the depreciation of regional currencies and high energy costs worldwide.
Chinese domestic consumption key
The outlook for Asian HRC prices looks bleak in Q4 as steel demand from Chinese property and manufacturing sectors is likely to remain weak till the end of the year, even though some support may come from stimulus packages from the Chinese government targeting domestic industries and consumer spending, according to market sources.
The prices of Asian SS400 HRC fell 15.7% to $565/mt FOB China Sept. 30 from $670/mt July 1, extending losses due to China’s COVID-19-related disruptions and a property sector in distress. The demand from Chinese manufacturers also declined during this period, particularly amid severe heatwaves and power shortages in August.
Steel mills saw mostly negative margins throughout Q3 and their average is estimated to fall to minus $28.4/mt, from minus $16.4/mt in Q2, according to data from S&P Global Commodity Insights. A high production cost has also meant that mills are unwilling to lower export offers.
The weaker demand also extended to Southeast Asian markets, especially in Vietnam where a decline in the Vietnamese dong against the US dollar made it less favorable for mills to import seaborne HRC. While some regional mills have been hesitant to cut their offer prices to levels below the cost of production, Indian mills have mostly remained quiet and offered limited volumes of Boron-added HRC amid ongoing steel export duties that were first imposed in May.
Steel producers in the EU have been forced to cut production amid high energy costs, leading to higher buying interest for Asian HRC from the bloc.
Market participants expect limited price upticks in the near term due to concerns over oversupply in Asia and steel output cuts in China in the winter.
Post time: Oct-09-2022