The Chinese government’s severe crackdown on iron ore prices drove down steel production costs last week, and expectations for steel prices have also moderated. Market sentiment suffered and thus dragged down Chinese hot rolled coil futures and spot prices in both domestic and export markets, Kallanish notes.

In Shanghai on Friday afternoon, 5.5x1,500mm Q235 HRC was traded at around CNY 4,990-5,000/tonne ($788-790/t), down CNY 50/t week-on-week. On the Shanghai Futures Exchange, meanwhile, the May 2022 contract for HRC gained CNY 84/t from Thursday but lost CNY 126/t on-week to CNY 4,907/t.

The pace of demand recovery was still insufficient to support a drawdown in national inventories last week, even as weekly production fell slowly due to production curbs. Raw material prices were regulated, making buyers more cautious.

Policies have been introduced to support loans and house purchases to bolster the development of real estate and other industries (see Kallanish passim). In the medium term, steel output will continue to be tight, and the recovery of the manufacturing industry and sentiment in the real estate industry will determine the price trend.

Chinese SAE 1006 HRC offers remained relatively stable in export markets last week, pegged at about $860/t cfr Vietnam for late-Match or April shipment.

Meanwhile, some traders were short selling Chinese HRC in Vietnam late last week as price expectations slumped. “SS400 HRC quotes are as low as $810/t cfr Vietnam, and SAE 1006 HRC offers are $845/t cfr, containing some 2mm products,” a source said on Friday. Some traders reported offers increased again slightly on Friday, however. Freight from northern China to Vietnam is now at around $30/t.

Kallanish assessed 2mm SAE 1006 HRC at $810-820/t fob China on Friday, down $5/t from one week earlier.

Rumours of a deal meanwhile sparked fierce debate in the market. Several sources reported a deal from a major mill in eastern China to southern Vietnam, which contained 10,000-11,000 tonnes of HRC and was sold at $880/t cfr Vietnam. “I heard that, and it should be 100% 2mm SAE 1006 or even thinner,” Kallanish was told by one source. But some traders believe it to be incorrect as Vietnamese buyers would not accept a price this high.