Exchange Rate Fluctuations Further Depress The FOB Steel Price, And Exporters' Quotations Continue To Differentiate

With the RMB depreciating further against the US dollar, sluggish overseas demand, and the spread of pessimism, China's export steel price continued to fall and expanded this week.

The RMB/USD exchange rate closed at 7.3055 on October 25, up 1.4% week on week, 2.5% month on month, and 14.4% year on year. When compared to the currencies of other major economies, the RMB and Indian rupee depreciated relatively slowly against the US dollar. In the last year, the Japanese yen, the euro, and the Turkish lira have all depreciated by 29.7%, 16.3%, and 95%, respectively, against the US dollar.

The RMB's depreciation rate has increased in the last month, resulting in a general depreciation of Asian currencies and increasing the steel price attractiveness of direct exports to these countries. Although overall demand remains weak, Chinese resources remain relatively competitive in the Asian market.

This week, Chinese HRC manufacturers reduced their export quotations in general. Official SS400 HRC quotations from steel mills in North and East China were concentrated at US$540-560/ton, down US$10-12/ton from the previous week. Some traders have more short-sale offers due to the general bearish sentiment. According to Mysteel, a small number of resource export offers are as low as $520/ton FOB, but this small sample size cannot represent the mainstream. Myteel estimated the export steel price of SS400 HRC at Tianjin Port on Wednesday at US$540/ton FOB, a US$10/ton decrease from the previous week.

Most Southeast Asian buyers have no plans to close and believe steel prices will continue to fall. According to Mysteel, the CIF mainstream price of SS400 HRC in Southeast Asia is US$545/ton CFR, a US$15/ton decrease month on month. Although mainstream resource offers from China and Japan remain above $550/ton FOB, some short unit steel prices were traded at $520-530/ton CFR, dampening market sentiment even further.

The Vietnamese Dong has been devalued significantly in recent months. On October 25, the RMB to VND exchange rate was 3402.0932, representing a 2.3% depreciation of the VND against the RMB in the previous month. Domestic inflation has risen, as have steel prices, and a lack of US dollars has hampered import activity. This is also the reason Vietnam recently acquired China. One of the factors contributing to the reduction of hot coil resources. Local mills, on the other hand, appear to be more inclined to export slabs to Europe, so their offers for domestic HRC are also high, putting buyers in a bind.

After actively exporting large quantities of hot and cold coils to the Asian market this month, Japanese and Korean steel mills have essentially met their sales targets for the year by the end of the month, and the Korean auto industry has provided some support this month, and steel prices have risen. Part of the reason is that its currency has depreciated against the dollar and euro, which has increased export activity to both regions.

Although Russian mills now prefer to export slabs rather than hot-rolled coils, their export offers have also been reduced since the beginning of the week. Offers to Turkey, the main selling market, have dropped from $630/t cfr last week to $600/t cfr Turkey this Wednesday, equating to $560/t fob Black Sea. On Wednesday, Mysteel estimated the export steel price of Russian HRC for delivery in the Black Sea at $560/t fob, a $20/t decrease from the previous month, while the export price of slab was $465/t.