Chinese HRC sold into Europe for inward processing

Chinese hot-rolled coil (HRC) has returned to the European HRC market, given its much cheaper prices compared to CIS and Turkish material.

One European company has bought Chinese re-rolling grade material to be turned into hot-dip galvanised coil, which will be sold outside of the EU. This "inward processing" means the buyer does not have to pay duties on the goods. Chinese mills are subject to anti-dumping/anti-subsidy duties in the EU, so the deal would not be feasible for most buyers, as it would be a high €700/t cfr price with duties attached. The importation of Chinese material for inward processing is a strictly administered customs regime and requires authorisation from authorities.

The deal was done around $730/t cfr, which nets back to $680-690/t fob China. Typically, the buyer would use Turkish or CIS material, but opted for Chinese given its authorisation and the much cheaper price compared to other export regions. Turkish mills are quoting $800/t fob minimum officially, more than $140/t above Argus' fob China HRC index.

While such prices are not available to the vast majority of European customers, the number of offers on the table from Asia — all at high levels still — and China's export re-emergence has sparked some concern that the market could soften in the second quarter. China has been quoting into Turkey and the Middle East at similar levels to the European sale, with some offers heard as low as $720/t cfr. Turkish domestic offers, as with exports, have been above $800/t fob.

By Colin Richardson