CHINA March 15 2017 10:26 AM

SHANGHAI (Scrap Register): The monthly average of ASEAN HRC index was $512.90 a ton in February, up by $3.35 a ton month-on-month. Improved trading activity after the long Lunar New Year break led to small increases in Asian steel prices, said the Steel Index.

In early February, Chinese producers returned from their Lunar New Year break, announcing new export offer levels for SAE grade of HRC, initially set between $515-530 a ton, increasing towards the end of the month to $530-545 a ton (CFR Vietnam). Although this price level was seen as too high by buyers, Chinese mills refused to lower their offers as they could achieve their targeted prices in the domestic market.

The most competitive seller into the ASEAN region in February was India, with asking prices for SAE grade at around $500- 508 a ton for end March or early April shipment.

Meanwhile, several deals for material from Taiwan, South Korea and Japan were heard to be concluded between $550- 570 a ton, mainly for ASEAN re-rollers requiring higher quality HRC.

ASEAN buyers showed a growing appetite for SS400 grade HRC from China. Transactions were done between $505- 510 a ton in the beginning of February, and by the end of the month buyers were willing to accept as high as around $515-518 a ton.

China’s steel purchasing managers’ index (PMI) increased to 51.4 points in February, up by 1.8 points from a month ago. The PMI reading bounced back into the expansion territory (above 50 points), reaching its highest level since April 2016.

According to China Steel Logistics Professional Committee (CSLPC), a compiler of the PMI survey, all major sub-indices showed expansion. Besides new export orders and finished product inventory, sub-indices that grew consistently in the past months, production, procurement, sales and employment all showed expansion. This was the first time all sub-indices remained above the threshold since China’s steel PMI commenced publication.

In January China shipped 7.42 million tons of steel, down by 23.2% year-on-year, according to the General Administration of Customs. This was the second m-o-m fall in export shipments.

A government official confirmed at a recent press conference that China will be resolute in its efforts to eliminate excess steel production capacity in 2017, despite concerns about the government’s next steps after recent steel price hikes. China plans to reduce steel output by a total of 100 to 150 million tons during 2016- 2020, with around 65 million tons of capacity eliminated last year, beating the official target of 45 million tons. 

However, reacting to improving prices and production margins, many mills raised their output. China’s crude steel production increased by 1.2 percent y-o-y to 808 million tons in 2016, compared with a 2.3 percent decrease in 2015, according to the National Development and Reform Commission (NDRC). And this year saw the trend continuing, as data for January showed that Chinese production rose by 7.4% y-o-y to 67.2 million tons.