[SMM Analysis]China-Indonesia Steel Price Spread Inverted, Overseas Demand Still Shows No Improvement

[SMM Analysis] China-Indonesia Steel Price Spread Inverted, Overseas Demand Still Shows No Improvement

• China-Indonesia Price Spread Inversion

From the price spread model, the most notable fluctuations are in the China-Indonesia spread. The slab spread has narrowed to zero, billet has even inverted, and HRC prices are also declining markedly. Specifically, according to SMM survey, Indonesian prices weakened sharply. On one hand, clients hold high inventory and are eager to sell at lower prices. On the other hand, due to quota impacts, exports to the EU are hindered, forcing them to cut prices to compete with Asian resources.

Data source: SMM

• Japanese Steel Scrap Under Pressure and Drifting Lower

After the Kanto tender weakened, several Japanese mills including Tokyo Steel successively lowered their scrap purchase prices. Last week, the domestic scrap price index lost stability. Although a downward adjustment occurred at end-July, the downtrend is expected to persist. For finished steel, July EXW prices announced by most major mills last week were largely flat. However, on the export front, after the EU implemented new quota policies, challenges for Japan’s steel exports have intensified. Despite strong reactions from Japan, the short-term trade difficulties are hard to reverse, which is expected to force Japanese mills to further adjust production, continuing production cuts.

• India HRC Shipments to Southeast Asia to Increase Due to Quotas

Last week, Indian steel remained under pressure. Mumbai HRC prices fell about $3/mt WoW to $602/mt EXW, with market transaction prices around $571-611/mt. Monsoon weather dampened construction and infrastructure demand. Spot procurement and restocking willingness remained weak, intensifying competition for low-priced resources. On the export side, affected by EU policies and quota adjustments, Indian steel exports to Europe are facing difficulties, prompting mills to adjust their overseas sales strategies. Flows of resources such as HRC to Southeast Asian markets like Vietnam are expected to increase significantly. Given that fundamentals are unlikely to improve before end-July, India’s domestic steel prices are expected to continue their downward drift through end-July.

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