[SMM Analysis] Overseas HRC prices Declined More Than Chinese Prices; Overall Procurement Demand Continued to Weaken

Passive Contraction in China–Foreign HRC Price Spreads and Blocked Export Channels

Price spread models showed entirely diverging trends. Steel billet price spreads were relatively stable, while HRC spreads continued to contract. The China–India HRC spread, after a streak of declines in mid-June, recently plunged to -36, an all-time low in the table. This figure was not only far above the quarterly average of -65, but also well below the current monthly average of -49. The root cause is not a sharp slide in Chinese export prices, but rather extremely weak Indian domestic demand. To defend their domestic market share and digest surplus production, local steel mills in India adopted a highly aggressive "defensive price-slashing" strategy. Meanwhile, given the domestic supply-demand pattern of strong supply and weak demand, there is still room for further downside in Indian domestic steel prices in the near term, and the China–India spread will hover at lows.

Data source: SMM

Monsoon Rains Suppressed Downstream Demand; Indian Steel Market Was in the Doldrums

Weighed down by the traditional demand off-season due to the monsoon rainy season and generally very cautious purchasing attitudes among buyers, Indian long steel prices remained under pressure last week. Rebar EXW prices dropped notably to around $630/mt EXW, hitting the lowest level since May. In contrast, Raipur billet showed slightly more resilience, with prices edging up about $2/mt to around $453/mt EXW. This was mainly supported by a boost from earlier transactions and short-term support from buoyant sentiment in surrounding markets, though current spot procurement remained cautious and restrained. Notably, Chhattisgarh has planned to raise electricity prices, which is expected to push up the production cost of electric furnace billet by about $3–4/mt starting in July, providing some cost support. Overall, the Indian steel market will continue to face a mix of weak demand and cost support in the near term, and prices are expected to remain on a weak fluctuating trend.

Off-Season Suppressed Rigid Demand and Shipping Disrupted: Southeast Asian Steel Market Stayed in the Doldrums Short-Term

Due to seasonal factors, construction activity rates in core Southeast Asian countries such as Vietnam, the Philippines, Indonesia, and Thailand have recently been low, directly limiting the release of rigid demand for long products like rebar and wire rod. Currently, major local mills' rebar EXW prices in Southeast Asia were generally weak, ranging between $520–535/mt EXW. Meanwhile, due to persistently subdued sentiment in end-user buying, destocking in the market remained relatively slow. Facing the current weak market, most buyers chose to wait and see, with purchasing strategies mostly centered on "purchasing as needed and buying just enough for immediate use." Additionally, stimulated by progress in US–Iran negotiations and news that the Strait of Hormuz may reopen, buyers in the Southeast Asian market grew more expectant of a pullback in ocean freight rates. Driven by the desire to "rush to buy amid continuous price rise and hold back amid price downturn," this expectation further amplified the market's bearish and wait-and-see sentiment. Still, the actual easing of shipping pressures stemming from geopolitical issues will take some time, and international freight rates are expected to remain mainly high and volatile in the short term.

New Quotas Taking Effect on 1 July Prompted Full Buyer Wait-and-See; European HRC Trading Mediocre, Import Offers Weakened MoM

Last week, the overall European steel market was relatively mediocre, with sellers and buyers locked in deep standoffs ahead of the policy window period, and both spot and import markets were subdued: In Germany, mainstream transaction prices for HRC with August–September delivery remained at €680–700/mt EXW. In Italy, mainstream transaction prices for HRC with July–August delivery were at €670–680/mt EXW. Most European buyers generally chose to refrain from booking and are fully waiting for the new import quota system that will officially take effect on 1 July. End-users and traders are eager to assess the actual restrictive impact of the new policy on future import volumes in order to readjust their procurement strategies. At the same time, hit by a double blow from sluggish European domestic demand and uncertainty over the quota policy, steel import activity in Europe also dropped to a freezing point. At present, HRC offers for August shipment from Turkey and Asia to Europe have pulled back to €640–650/mt DDP. With a lack of buyer support, overseas mills' forward export offers showed clear signs of weakening on a MoM basis.

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