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Brazilian HRC prices unaltered, FX begins to concern mills

Increase font size  Decrease font size Date:2016-07-19   Views:410
Domestic prices for spot negotiations of hot-rolled coil in Brazil remained unchanged throughout the week, but the slight appreciation of the real against the US dollar began to concern producers, sources said.

The Platts weekly assessment for Brazilian HRC was steady Friday at Real 1,950-2,000/mt ($596-$611/mt) ex-works, excluding taxes. The currency exchange on July 15 was $1/Real 3.25.

According to a market participant, local producers continued "negotiating HRC at the same levels of the past week and are not planning any change in the near future."

Sources also cited producers' concerns with the foreign exchange rate, which is making foreign material much cheaper than domestic goods in the past weeks.

One trader cited some domestic products "with a premium of 15% over Chinese material," signaling that importing flats may become something interesting again.

Another trader disagreed.

"If [international] iron ore prices continue going up, China will not be able to reduce its [steel] prices even more, as it has been doing lately. Prices will only drop if iron ore falls considerably," he said. "We also need to consider the behavior of the exchange rate in a long period."

Moreover, one buyer highlighted "not yet receiving any of the price adjustments announced in the past months by local steelmakers" but confirmed mills are "trying to push for an increase between 8% and 9% for August." He added, though, his company "is not willing to absorb this hike integrally."

Another player added he does not see a real possibility for the recent price hikes to stick, explaining the country is currently in a very delicate moment.

"I don't see room for these pricing adjustments, maybe for 5%-8%, but not 30%," he said, citing the three consecutive price hikes of about 10% each announced by producers since April. "There is no way the market will absorb them," he said."You don't need to be smart to see the current economic scenario and how buyers may behave in light of higher prices. I understand mills' situation as well, but the small companies have no way out but to shut doors."

The same source also cited buyers' dissatisfaction with producers services. "Some steelmakers are delivering products at once, while they should deliver them in three months, for example, forcing payment at sight," he said, also citing lower quality products arriving in companies' yards.
 
 
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