Chinese Steel Market Highlights- Week 42, 2019

This week, Chinese finished steel prices witness steep cuts in the domestic market over slow buying and volatile futures.

Increasing competition from Russia and India continues to keep the Chinese HRC export offer under pressure. Rebar export offers tumble amid lower bids from overseas buyers. Billet export offers remain stable however, the prices decline in the domestic market. Meanwhile, sport iron ore prices decline amid higher inventories and weak demand.

Meanwhile, as per the custom data released by NBS this week, China’s crude steel output declined by 5% on a monthly premise to 82.77 MnT in Sep’19 over 87.25 MnT in Aug’19.

Along with this, China has witnessed a rise in crude iron ore production by 4% to 77.4 MnT in Sep’19 as compared to 74.3 MnT in last month.

On a monthly basis, the nation’s finished steel exports increased by 6% to 5.330 MnT in Sep’19 in comparison with 5.006 MnT in the preceding month amid restocking activities before Golden week holidays.

Chinese spot iron ore prices decline on weak demand- Chinese spot iron ore prices opened up this week at USD 91.5/MT CFR China and dropped to USD 85.70/MT CFR China towards weekend.

Prices have dropped down amid reduced demand and rising inventory at Chinese ports. Also, Chinese steel mills preferred domestic iron ore concentrate and pellet amid falling steel margins.

As per data compiled by SteelHome consultancy, Iron ore inventory at major Chinese ports increased to 131.1 MnT as compared to 129.95 MnT last weekend. The iron ore inventory reached almost 5 months high as the level was last witnessed towards mid-May at 131.7 MnT.

Spot pellet premium up W-o-W- Spot pellet premium for Fe 65% grade pellets assessed at USD 23.15/MT, CFR China, as against USD 17.65/MT, CFR China assessed a week ago. The approaching winter curbs in China have resulted in an increased preference for pellets.

China’s top steel-making city of Tangshan this week has issued second-level pollution alert which will limit production further. Also, a week before, mills in Tangshan were ordered to reduce sintering, pelletizing and blast furnace operations from Oct. 10 until Oct. 31. According to Mysteel consultancy out of Tangshan’s 33 steelmakers, 30 have already halved sintering, pelletizing, lime kiln and blast furnace operations since Oct. 10.

Spot lump premium continues to rise on a weekly basis- Spot lump premium picked up to USD 0.2100/DMTU as against USD 0.1900/DMTU a week ago. This continuous rise has lead to diminishing use of lumps in blast furnace and has reduced cost efficiency rendering shift towards pellets.

Coking coal offers witness rebound after the National Day holidays- Seaborne hard coking coal prices inched up as Chinese traders resume trade activities post the National Day holidays.

Meanwhile, slowdown across automobile, construction and manufacturing sectors continues to keep Indian domestic demand weak.

Thus, the latest offers for the Premium HCC grade are assessed around USD 152.25/MT FoB up by USD 3.50/MT W-o-W basis which was USD 148.75/MT FoB basis in the previous week.

China’s billet prices fell by RMB 40/MT W-o-W basis- Nation’s domestic billet prices settled at RMB 3,350/MT, down RMB 40 against RMB 3,390/MT in the preceding week. Domestic billet prices went down with the announcement of production cuts in the Tangshan region.

Cheaper alternatives weigh on Chinese HRC export offers- Availability of cheaper alternatives from Russia and India has kept Vietnamese buyers enticed, leading to lower demand for Chinese HRC. Thus, intense competition in the overseas market weighs on the Chinese HRC export offers this week.

Chinese HRC export offers witnessed a decline of USD 10/MT and stands at USD 440-445/MT FoB as against USD 450-455/MT in the preceding week.

Domestic HRC prices plunged by RMB 70-80/MT to RMB 3,490-3,510/MT as compared to RMB 3,570-3,580/MT in Eastern China (Shanghai) in the previous week.

Sentiments in the domestic market continue to remain bearish amid falling futures, expectation of higher supply with lenient production restrictions and dull buying interest among end-users.

Chinese Rebar export offers inch down over fall in domestic prices- Nation’s HRC export offers witness decline following a reduction in domestic prices. Meanwhile, transportation costs from the stockyard to construction sites have increased because of which buyers have adopted paucity on the procurement activities.

Currently, the nation’s rebar export offers stand at USD 450-455/MT FoB China down by USD 5-10/MT in comparison with USD 455-460/MT FoB China in the previous week.

Meanwhile, domestic rebar prices stood at RMB 3,580-3,610/MT (Eastern China) slashed by RMB 120/MT as against RMB 3,700-3,730/MT (Eastern China) a week ago.

However, December marks the start of winter in China, when falling temperature shall hamper construction activities. This may further keep rebar prices downside in the near term.

Chinese Steel Market Highlights- Week 42, 2019

Source: SteelMint Research