[SMM Analysis] Global Steel Price Increases and Supply Issues Widen Export Price Spreads

[SMM Analysis] Global Steel Price Increases and Supply Issues Widen Export Price Spreads

• Price Spread Fluctuations

On the spread model, China's HRC discount to overseas widened across the board this week (8/28→9/4): China−India from −25 to −34 (India 520→530, China 495→496), China−Türkiye from −80 to −89 (Türkiye 575→585 on an 8/25→9/1 basis), China−Indonesia from −20 to −29 (Indonesia 515→525) and China−Black Sea from 0 to −4 (Black Sea 495→500). Semi-finished widened faster: billet to Indonesia from −10 to −12 (China 465→468, Indonesia 475→480) and slab from −10 to −15 (China flat at 470, Indonesia 480→485). The pricing implication: it is not that China failed to raise offers (HRC +1, billet +3, rebar +3) — it is that the increase lagged overseas by a wide margin: two rounds of domestic coke increases lifted costs, but overseas buyers gave China far less room than they gave India, Türkiye and Indonesia.

Data source: SMM

• Chinese export offers only edged higher this week while overseas markets rose much harder and every spread widened. Beyond the cost push, the driver was two supply-side events in Southeast Asia reinforcing each other: 1. Hoa Phat's increase went through, repairing sentiment on local offers. Once this round of Hoa Phat increases was accepted by the market, sentiment on offers from Southeast Asian domestic mills improved markedly and overall levels were adjusted up with it; 2. Damage to a reheating furnace at FHS (Formosa Ha Tinh) reinforced expectations of tighter regional supply. The FHS reheating-furnace damage sharpened the market's view that flat-steel supply in Vietnam and neighbouring markets had abruptly tightened; compounding the first event, Hoa Phat, Dexin and others raised works prices again, and the spread to Chinese export offers kept widening.

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