TEX reported that negotiations on hot rolled steel coils for spot trades seem to stop in the Asian area. It is seen that as iron ore prices for next quarter shipment (October to December) were set at markdown, customers like stockists or warehousers enter into a wait and see stance anticipating further price down of HR coils.

Nowadays, the benchmark of HR coil prices in Asia is those of Chinese ones. Their prices are said to have been offered at USD 510 CFR for October 2012 shipment. On FOB basis, those become the level of USD 400 dipping below USD 500. In China, those become the level of USD 480 before tax, and also for the export market, prices of the USD 400 level begin to appear. However, there is no information that a contract was concluded at this level of prices. Stockists are probably hoping further reduction in price, and are passing on this level of prices.

Iron ore prices for Japan, Korea and so on were settled at USD 117 FOB per ton decreased by USD 19.50 from those in this quarter. In the latter half of August 2012, the market prices of HR coils were believed to be USD 530 to USD 550 CFR. The Chinese mills are seen to be making an offer in anticipation of price down of raw materials for next quarter shipment. The Chinese mills are said to be making spot purchase of iron ore at below the USD 90 FOB level. If so, sooner or later, HR coils prices are predicted to be stabilized at the USD 400 level. Prices of cold rolled steel sheets are said also to become the USD 590 CFR level dipping below USD 600 and downward pressure on HR coils is likely to be put from CR sheets as well.

At present, unless otherwise the Japanese mills also review their quarterly contracts with the owners of iron ore mines, change them into spot purchase contracts like the Chinese mills, and play same game with the Chinese ones as far as import raw materials are concerned, the environment that they can't even compete with the Chinese mills on HR coils will continue.

Source - TEX Report Limited

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