LME China HRC Trading Volumes Surge Past 200,000t in September

LME China

In a striking milestone for the global steel market, trading volumes for Chinese hot-rolled coil (HRC) futures on the London Metal Exchange (LME) soared past 200,000t in September, reaching over 210,000t. This marked the second-highest monthly volume on record, just behind July's all-time peak of more than 225,000t. The strong performance in September pushed the year-to-date total to an impressive 807,000t, surpassing the volumes seen in recent years, which often lingered below 400,000t. The last time such significant levels were reached was in 2020 when 849,000t were traded by the end of September.

Housing Policy Reforms and Market Movements

This rally in HRC futures was partly fueled by key changes in China's housing market policies. Cities like Guangzhou have removed all restrictions on house purchases, while major urban centers such as Shanghai and Shenzhen lowered the down payment ratio for homebuyers. These policy shifts stirred market speculation, with some participants suggesting that the immediate impact on steel demand might be limited. However, others expressed optimism that these changes could help clear existing housing inventories and trigger new construction starts, potentially bolstering demand for steel products like HRC in the near future.

Meanwhile, volatility in physical prices added to the market's dynamism. The fob Tianjin index, which serves as the cash settlement basis for LME's China HRC contracts, showed significant fluctuation throughout September. After dipping to $449/t on September 23, the index rebounded sharply, reaching $509/t by the end of the month—a $37/t surge in a single day. This price jump led to a scramble among participants in both the derivatives and physical markets, with many rushing to cover short positions, adding further momentum to the rally. By month’s end, October contracts had climbed from $460.50/t to $523.50/t, while November contracts spiked from $468.50/t to $530.50/t.

Chinese Exports Continue to Pressure Global Markets

In addition to domestic factors, China's aggressive export strategy has kept global HRC markets under pressure throughout 2023. Despite facing anti-dumping and countervailing duties of 18.1% in Europe, China's ability to offer competitively low prices allowed it to increase exports into the European market. This has not only sparked several dumping investigations but also placed a significant strain on HRC pricing and production competitiveness globally.