Vietnam’s Formosa offers July HRC below expectations

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Vietnam-based Formosa Ha Tinh Steel has increased prices for July shipments of hot-rolled coil (HRC) by less than expected as it seeks to regain market share from the influx of imports.

It sent customers offers between $420-440/t cif Vietnam across grades of SAE pipemaking and rerolling, and SS400 coils, up from $410-420/t cif Vietnam for June. The steelmaker will negotiate with buyers on a case by case basis, keeping to its change last month when sharp spot market declines forced it to abandon its official monthly price list for June offers.

“Formosa did not raise offers as sharply as the market predicted this time. I think the reason for the mild increase is the mill’s sales pressure, since it is offering further discounts for special customers,” a Vietnamese trader said. Exporters from China, South Korea and India “all increased HRC offers a lot this month, so maybe Formosa is seizing Vietnam market share with ex-works prices acceptable for most local buyers”.

The mill’s thinner base grades of SAE1006/SPHC/SPHT1 HRC will be priced at $440/t cif for July shipment, with exact offer levels varied among customers. Some of its larger customers received offers $10/t lower than most other buyers, market participants said.

Thicker grades SS400 and pipe-making grade SAE1006 coils were offered at $430/t cif. Non skinpassed hot-rolled bands (HRB) were offered at $435/t cif.

The offers are lower than expected because South Korean mill Posco was heard to raise September shipments offers to $480/t cfr Vietnam this week, and Chinese offers are above $450/t cfr, a north China mill official said.

Formosa cut its HRC sales allocation by 200,000t for June shipments, and the July offers are for around 200,000t of HRC for domestic and export sales, about half of its usual allocation, market participants said.

Formosa, which produces 5.2mn t/yr of HRC in addition to billet and wire rod, has not confirmed any production cuts.

Formosa may be wary of adding back too much supply to avoid the risk of undoing the market rebound, market participants said.

The offer levels are in line with the market trend.

The Argus Asean SAE1006 HRC index has risen by 8.8pc, or $35/t, to $429/t cfr Vietnam this month. The $12/t index increase late last week could be a factor that delayed Formosa in releasing its offers that usually come out mid-month, market participants said.

Rebounding domestic demand in China and a surge in Chinese HRC imports at higher price levels from origins including India, South Korea, Japan and Taiwan lifted offers across markets including Vietnam.

But the market is showing some signs of softness after Beijing disappointed on stimulus last week with domestic steel prices turning lower.

Indian HRC offers decreased to $427-428/t cfr Vietnam today from last week’s $430-435/t cfr Vietnam for SAE grade coils. Turkish mills have also re-entered the market, offering at $420-425/t cfr Vietnam for July shipments of SAE grades, so Formosa may have anticipated receiving many complaints from buyers if it had aggressively raised offers, a Vietnamese trader said. Another factor is the relatively weak downstream demand during the Covid-19 pandemic.

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