After experiencing a small retreat in December, prices for carbon steel hot-rolled coil (HRC) in China are expected to fluctuate within a moderate range in January, Mysteel's latest monthly report on the flat product suggests.
During December, domestic HRC supply remained relatively loose, even though production eased slightly from November as steelmakers scaled back output in response to weakening demand. Consequently, by December 25 hot coil inventories in the 194 warehouses nationwide that Mysteel tracks were still 20% higher on year.
However, underpinned by relatively firm prices for raw materials, especially those for iron ore, HRC prices haven't shown any marked decline. On December 31, Mysteel assessed the average price of Q235 4.75mm HRC nationwide at Yuan 3,290/tonne ($471/t) including the VAT, lower by a small Yuan 28/t or 0.84% from end-November.
Entering January, steel mills are expected to maintain a steady supply of the flat steel as more makers have finished their annual overhauls and resumed operations.
The latest Mysteel survey results released on Thursday showed that HRC output continued growing over January 1-7 to total 3.06 million tonnes for the week, essentially unchanged on week.
On the other hand, demand for hot coils is likely to remain weak this month, given that consumption of products fabricated from the coils such as white goods, automobiles and construction machinery remained subdued in the winter off-season. This, coupled with tight cash flow conditions at some firms, may further dampen their appetite for the flat steel procurement, the report noted.
Meanwhile, traders are undecided about future price trends for HRC and so are being generally reluctant to store coils. Indeed, some are actively offloading their stocks while refraining from major restocking moves, Mysteel Global notes.
In fact, on January 8 Mysteel latest survey found that hot coil stocks sitting in the 194 commercial warehouses in the 55 cities nationwide regularly tracked had risen by 50,400 tonnes or 1.3% to 3.95 million tonnes, snapping a seven-week decline.
Despite the weak HRC fundamentals, the outlook for the coils is not all grim.
According to the People's Bank of China Work Conference held in Beijing over January 5-6, China will continue to implement a moderately loose monetary policy in 2026. This piece of news, together with rumors of potential capacity cuts in a major Chinese coal-producing hub, has brightened the market mood and caused derivative prices for steel to surge.
On January 7, the most-traded HRC contract for next May delivery on the Shanghai Futures Exchange ended the daytime trading session at Yuan 3,332/t, higher by Yuan 82/t or 2.5% on day, the bourse's data showed.
Reflecting the sentiment, on the same day Mysteel assessed China's national price of Q235 4.75mm HRC at Yuan 3,310/t, higher by a small Yuan 29/t or 0.88% on day.
Consequently, HRC prices may remain range-bound in January, the report concludes.
Source:Mysteel
