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Asian hot-rolled coil prices increased further Wednesday as Chinese mills were confident of their domestic market strength continuing and firmed existing official offers for exports, with ripple effects seen in Southeast Asia.

S&P Global Platts assessed SS400 HRC 3 mm thick at $454/mt FOB China on Wednesday, up $5/mt day on day. On a CFR Southeast Asia basis, the same grade of coil was assessed at $451/mt, also up $5/mt from Tuesday.

While several Chinese mills kept their official offers, announced Tuesday for SS400 HRC 3-12 mm thick coil for January, unchanged at $460-$470/mt FOB China, they were firmer given the uptick in the domestic market, especially in the southern part of China.

"Main reason [for the uptick in the domestic market] is low stocks of rebar in the south, boosting the whole steel market today," a Shanghai-based trader said. "Compared with domestic prices, the export price is quite reasonable."

While the uptick in domestic rebar prices was stronger than HRC, mills seemed less inclined towards HRC exports at lower prices.

According to sources, the likelihood of Chinese mills increasing offers further in the coming days was high, even though orders had not been picked up recently. One mill was offering at $450/mt Tuesday, and stopped offering at the same level Wednesday, given the uptick in the domestic market.

"Now, $460/mt [FOB China] is non-negotiable ... no matter how big the order is," the same East China-based trader said.

Meanwhile, China's central bank cut its new benchmark lending rate Wednesday for the third time since August, adding to the strength in the domestic market.

"This [rate hike] will certainly be an additional push but not the core reason for prices," a Shanghai-based trader said.

In Shanghai, the spot price of Q235 5.5 mm HRC was assessed at Yuan 3,685/mt ($574.3/mt) ex-stock, including VAT, up Yuan 40/mt from Tuesday.

On the Shanghai Futures Exchange, the most actively traded January contract closed at Yuan 3,529/mt on Wednesday, up Yuan 28/mt or 0.8% from the previous day.

Separately, Platts assessed SAE1006 HRC at $460/mt FOB China Wednesday, up $5/mt on the day. On a CFR Southeast Asia basis, the same grade of coil was assessed at $447/mt, up $4/mt over the same period.

Offers for Japanese SAE coils for January shipment were heard Wednesday at $480/mt CFR Vietnam, on the back of increased offers from Indian mills which stood at $455-$460/mt.

"We recognize prices are in an uptrend with Indian mill offers for January shipments at $460-$470/mt CFR Vietnam," a Japan-based mill source said.

"Given these mills' prices and our premium, we set our offer price to Vietnam at $480/mt CFR," the source added.

However, despite the recent uptick in Southeast Asian prices, there was uncertainty around whether prices higher than $450/mt would be accepted in the near term even as bids touched $445/mt Wednesday.

"I think the demand is still slow in the ASEAN region," a Japan-based trader said.

"Even a Japan-based customer cannot accept a much higher price than an India-based one," a second Japan-based trader said. "He cannot make a loss by buying $20-$30/mt higher."

"Demand has increased and supply has been cut, so think December was the bottom price," a third Japan-based trader said. "Unless Indian mills decrease prices again."

Amid slow automobile sales in Japan as a result of the consumption tax becoming effective October 1, sources said that Japanese mills may have to focus more on exports in the second half of the fiscal year [October 2019-March 2020] and at competitive prices, even though they had cut capacity utilization.

Additionally, an increase in freight rates to the tune of $5-$10/mt from Japan to Vietnam for a 10,000-25,000 mt vessel for January-February shipment was heard being attributed for higher CFR prices, given the upcoming IMO 2020 regulations.

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