Weekly: Chinese Steel Market Highlights

Chinese steel market remained abuzz with a hike in export tax rebate on a few products including HRC, wire rod etc. This week rebar and billet prices rose on the resumption of construction activities. However domestic HRC prices reported a decline in the increased supply.

–The HRC export offers fell this week post announcement of an increase in tax rebate to 13% which was 10% earlier to stimulate export trading on sluggish domestic demand.

–The National Bureau of Statistics (NBS), showed the nation’s crude steel output at 154.7 MnT, up by 3% Y-o-Y basis in Jan-Feb’20 when compared with 150.05 MnT in the similar time frame of CY’19. Also, nation’s crude iron ore production was recorded at 111.19 MnT in CY20 (Jan-Feb’20), down 6% as against 118.54 MnT in CY19 (Jan-Feb’19).

Spot iron ore prices drop during the week-

— Chinese spot iron ore prices opened up this week at USD 90.05/MT, CFR China and decreased to USD 86.55/MT, CFR China towards weekend amid rising concerns due to Coronavirus outbreak. Also, the European steel production witnessed falling amid worsening deadly virus outbreak.

— As per data compiled by Steel Home consultancy, Iron ore inventory at major Chinese ports recorded at 123.75 MnT as of 19th Mar as against 126.3 MnT assessed a week ago.

Spot pellet premium down W-o-W-

— Spot pellet premium for Fe 65% grade pellets assessed at USD 29/MT, CFR China as against USD 30.85/MT, CFR China last week. End-users are not willing to pay a premium for improved efficiency at this point in time.

Spot lump premium for the week witnessed stable at USD 0.3100/dmtu.

Coking coal prices moved up as Chinese importers resume buying-

— Seaborne coking coal prices gained moderately this week, on the back of fresh deals concluded yesterday with Chinese end-users.

— However, Indian demand for coking coal still remained subdued on increased domestic availability and lockdown in various regions due to coronavirus pandemic.

— Latest offers for the Premium HCC grade are assessed at around USD 162.50/MT FoB Australia, which was USD 161/MT FoB basis in the preceding week.

Billet imports resumed with improving domestic demand-

— China was reported to book approximately 1,00,000 MT billets from all the major exporting nations like Russia, India, and Iran recently.

— Nearly 40,000 MT Russian billets were reportedly booked to China at USD 400/MT, CFR basis.

— Indian origin billet for 40,000 MT quantity was heard to have booked to China at USD 400/MT, CFR for May’20 shipment.

— Iranian origin billet was reported to be booked at USD 390-395/MT, CFR.

— Unlike the rest of the world, the intensity of the COVID-19 is getting low in China and the steel market has started improving. Meanwhile, the domestic billet prices in China are at RMB 3,150/MT ex Tangshan, including VAT. In the current situation, the domestic billet could look reasonable to procure but it is worth noting that the shipments of the above-mentioned deals are scheduled from late Apr’20 onwards. And with the current improving rate of the domestic billet market of China, the current import deal is a wise move from the Chinese marketers.

HRC export offers tumble post govt announces increase in tax rebates-

— The nation’s HRC offers tumbled by 5-10/MT this week post announcement by the ministry of finance in China to increase the tax rebate to 13% which used to be 10% earlier. The move takes to stimulate export trading and allows Chinese steelmakers to reduce the export offers without hurting their profit margins.

— Thus, the current export offer stands at USD 450-460/MT FoB China when compared with USD 460-480/MT FoB basis in the preceding week.

–Also competitive HRC offers from major exporting nations can pull down nation’s HRC offers in the near term.

— Meanwhile, domestic prices slashed by RMB 60/MT to 3,440-3,450/MT (Eastern China), which was RMB 3,500-3,510/MT (Eastern China) a week ago.

Rebar export offers inched up on improving domestic prices-

— The rebar export offers witness marginal upside following gains in the domestic market. The increased pace of resumption of the construction projects and restocking of inventories market leads to an increase in domestic rebar prices.

— The domestic prices rose by RMB 50/MT on the back of improved buying to RMB 3,500-3,530/MT (Eastern China) in comparison with RMB 3,450-3,480/MT (Eastern China) a week ago.

— Currently, Rebar export offers assessed at USD 448/MT FoB China as compared with USD 445/MT FoB basis in the previous week.

Source: SteelMint Research