SHANGHAI, Aug 16 (SMM) – Most steel mills raised offers for hot-rolled coil (HRC) this week as output slipped and profits shrank this month. The high season in the manufacturing sector, likely to begin in September, also accounted for higher offers of HRC, SMM believes.

As of Wednesday August 15, Wugang raised the September benchmark price for Q235 HRC by 50 yuan/mt. Shougang increased their September benchmark price for SS400 HRC by 50 yuan/mt. Liangang increased their mid-August benchmark price for Q235 HRC by 100 yuan/mt.

HRC production dipped in August as blast furnaces in many mills began to undergo maintenance from the beginning of June. Mills in the north faced continuous pressure from environmental protection initiatives, which also dragged down output.

Meanwhile, rising prices of raw materials eroded profit margins for mills. Metallurgical coke prices jumped some 300 yuan/mt over the fortnight through August 15 with steel scrap prices up 140 yuan/mt. As of Wednesday, HRC production at mills with blast furnaces saw profits of 1,052 yuan/mt, based on iron ore prices of $65.5/mt. This fell 181 yuan/mt from July.

While HRC prices have climbed to highs this year, further upward room is still likely as the manufacturing sector enters its traditional peak season from September.

Liugang in the north, however, was less optimistic about the recovery of demand in September as some automakers across the region operate in losses. Demand for air conditioners is also weak.

Liugang stepped up rebar production as it is more bullish on steel products for construction, given the government’s fiscal stimulus.

Orders failed to pick up at Baosteel after it held its Baoshan benchmark prices for Q235 HRC unchanged and raised Dongshan and Meishan prices by 50 yuan/mt. Traders and downstream consumers remained cautious in making purchases as the low season wore on, the mill said.

HRC prices are likely to continue their strong performance in the short term as traders are set to hold their offers firm on rising costs.