The day after the export rebate cancellation announcement coming out, the hot rolled coil price began falling in the Shanghai market. Although Chinese steel traders are not opportunistic about the future, they believe that CNY 4000 per tonne is the bottom price of hot rolled coil.
The steel export rebate cancellation is really bad news to Chinese domestic market, as steel export will encounter more difficulties and export volume will decrease. As a result, more steels have to be consumed in the domestic market, which means the supply and demand contradiction will be intensified further. Certainly, the current situation is against Chinese steel market. In the short run, the hot rolled coil market is also influenced, so the price may continue to go down.
However, it is widely expected that hot rolled coil price will not fall sharply in the future, as the present price almost hits the bottom.
Now in the Shanghai market, the carbon hot rolled coil price has fallen to CNY 4120 per tonne, some deals are even at CNY 4100 per tonne, and those prices equal the production cost of steel mills. Considering that Chinese steel mills are making little or even no profits now, the export rebate cancellation will probably not force Chinese domestic steel price to fall further, which is a strong support to the stabilization of hot-rolled coil price in the spot market. Therefore, CNY 4000 per tonne will likely to be the bottom price of Chinese hot rolled coil. It is estimated that hot rolled coil price will be around CNY 4200 per tonne, with a small range fluctuation of CNY 150 per tonne.