LME fob China HRC contract trades three times

The fob China hot-rolled futures contract traded three times today on London-based metals exchange the LME, the first since the contract's launch on 11 March.

The contract — cash-settled against Argus' fob Tianjin HRC index — traded at $515.50/t for April, at $511/t for May and at $479/t for November.

With the index at $535/t fob and just nine working days left until April, derivative market participants saw the rationale for buying at $515.50/t. The deal was concluded at the initial offer level.

The whole curve is steadily backwardated through to March 2020, reflecting the strength of current spot pricing and expectations of a softer market going forward. The physical market in China remains firm, with the Tangshan production hub issuing new restrictions on blast furnaces, sintering and pelletising plants for the remainder of March, while rolling mills were also forced to make large cuts. With mills in Linfen city in Shanxi province required to upgrade emissions controls by June and sinter plants to do so by September, some market participants suggest that in the future cuts might no longer be restricted to winter.

Meanwhile, Taiwanese firm Formosa's new offer, up by $15/t, remains at parity or below Chinese offers, indicating limited buy-side appetite in southeast Asia. European importers have complained about tightening export allocations and the continuing relative strength of fob and cfr European quotes, compared with more competitively priced domestically produced material available with shorter lead times.

Traders also said it bodes well that the contract traded as far out as November.

Market maker Amalgamated Metal Trading was responsible for some of the first trades on the contract.

Meanwhile, Rio Tinto sold a spot cargo of Pilbara Blend fines against Argus' ICX iron ore index for the first time. The sale — concluded at a $1.50/t premium to the April average of ICX and Fast Markets MB62pc Fe index — was carried out over the Corex trading platform.