The post-Covid-lockdown reopening of Shanghai and improvement in confidence brought about by stimulus policies have stimulated a significant rebound in domestic hot rolled coil futures and spot prices. However, low demand weighed on prices in export markets and transactions were sluggish this week, Kallanish notes.

In Shanghai on Thursday afternoon, 5.5x1,500mm Q235 HRC was traded at around CNY 4,940-4,970/tonne ($740-745/t), up CNY 225/t week-on-week. On the Shanghai Futures Exchange, meanwhile, the most-traded, October 2022 contract for HRC gained CNY 63/t from Wednesday and CNY 181/t versus last Friday to CNY 4,879/t.

For the rest of the year, purchase tax reduction policies are forecasted by the China Association of Automobile Manufacturers to boost annual car sales by 2 million units. This equates to 9.34% of China’s passenger car sales in 2021. This has raised market expectations for a June recovery and for a longer-term rebound in HRC sales.

Pre-Dragon Boat Festival holiday purchases also partially helped overall HRC inventory to fall again. Inventories fell by 1.7% on-week to 3.7 million tonnes. Social and mill inventories were down 0.96% and 3.55% respectively to 2.64mt and 1.05mt, SMM data show.

Prices dragged in export markets, however, due to stagnant demand. Quotes for July-shipment SAE 1006 HRC vary between $775/t and $800/t cfr Vietnam.

Indian offers at similar levels were also competing with Chinese sellers in a limited market. A deal for Indian-origin SAE 1006 HRC was concluded at $748/t cfr Ho Chi Ming City this week (see Kallanish 2 June). “I could accept the price as long as the customer buys 30,000 tonnes too,” an exporter in Tangshan tells Kallanish.

Kallanish assessed 2mm SAE 1006 HRC at $730-740/t fob China on 2 June, down $10/t from last Friday.

However, Chinese exporters may retreat if the domestic market rally extends for a long period and Indian mills insist on competing in overseas markets with low prices, under pressure from export duties.