After the sharp jumps of April and May, Asian HDG prices have now stabilised as we suggested. Buyers have secured the majority of their requirements for Q2 and most of Q3 and are therefore staying away from large-scale purchasing. Mills on the other hand have also sold forward and as yet are avoiding pressure to discount. This suggests that prices are likely to hold in the short term as re-rollers process high-priced slab and coil over the next month or so and as a result will be reluctant to cut pricing. We remain cautious of the second half of the year as iron ore and coal prices may fade from peaks and higher steel output and availability could depress coil prices. However, as demand shows little sign of fundamental weakness, we believe that any correction will be relatively gentle.
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