Steel prices in the Chinese domestic market continued to soar on rallying futures, higher production cost, and healthy demand from downstream and end-user industry. HRC export offers rallied for the sixth consecutive week on demand recovery in the overseas market. Rebar export offers continued to remain competitive. Winter restocking demand and concerns of tighter iron ore availability pushed iron ore price upwards.
Also this week China’s steel giant, Baosteel announced a hike up to $76 on bullish market outlook.
In addition to this, Chinese finished steel export volumes increased by 9% m-o-m to 4.40 mn t in Nov ’20 against 4.03 mn t in Oct ’20.Iron ore imports stood at 98.15 mn t in Nov ’20, lower by 8% as compared to 106.74 mn t, as per the recent data released by the General Administration of Customs.
Chinese spot iron ore price hits $160/t CFR mark- Chinese spot iron ore fines (Fe 62%) price opened at $147.55/ t this week and increased to $160.7/t towards the weekend. Bullish sentiment for iron ore demand stemmed from strong flat steel prices and winter restocking demand. Also, the prices favoured on expectation of the Australian cyclone affecting loading at Port Hedland.
Few major iron ore miners slash production guidance-
- Vale in its recent press release on 2nd Dec ’20 notified that the company has reduced its iron ore production guidance to 300- 305 mn t as against previously set guidance at 310-330 mn t.
- Anglo American has has reduced the guidance to 37 mn t for Kumba iron ore against previously set guidance at 37-39 mn t. These factors may keep iron ore supplies tight in the near term.
- Brazil’s Samarco is all-set to resume mining operations at its Germano complex from late Dec ’20, five years after the deadly dam burst. The commissioning process at the complex, starting with the ramp-up of two concentrating plants and a new plant to filter waste from mining activities. Production should begin by the end of Dec at its Ubu Complex where the company produces iron ore pellets. Initially, the miner is expecting to operate at 26% capacity i.e 30.5 mn t pellets pa, as per reports.
As per data compiled by SteelHome consultancy, iron ore inventory at major Chinese ports decreased to 125.85 mn t this week as against 128.7 mn t assessed a week ago.
Spot pellet premium down on an increase in preference for lumps- Spot pellet premium for Fe 65% grade pellets assessed at $21.15/t down against last week prices at $ 31.75/t. Surging prices for iron ore fines weighed on pellet premiums with rising prices steering some end-users toward using lump despite higher coking usage costs. Sintering restrictions are expected to be supportive for pellet prices but they are unlikely to rise at the same rate as fines given the overall high fixed prices now.
As per data compiled by SteelHome consultancy, pellet inventory at major Chinese ports dropped to 7 mn t this week as against 7.6 mn t assessed a week ago.
Spot lump premium increased on higher demand- Spot lump premium witnessed at $ 0.1220 as against $ 0.1125 last week. Lump demand picked up and prices were leading due to production curbs in Tangshan. Several Chinese end-users indicated that South African lump was in higher demand due to better substitute for Indian pellets in small volumes.
Coking coal prices remain largely stable w-o-w- Seaborne coking coal prices have remained range-bound, despite continued demand from non-Chinese steelmakers.
A couple of fresh bookings for premium coking coal were done earlier this week, supporting prices. Trading activities in the China market have slowed down during the latter part of this week due to the conclusion of few deals in the past two weeks.
A further slowdown is expected toward the end of the year, while the Indian market is not expected to see significant spot purchases until at least mid-January.
The latest offers for the Premium HCC grade are assessed at around $101.50/t FoB Australia, which was $101.00/t a week back.
Chinese domestic billet price rise sharply- This week, the billet prices in the Tangshan market (northeast China) settled with an increase RMB 100 ($15), against last week. The prices of commonly traded Q235 billet 150mm diameter were reported at RMB 3,680/t ($562/t) in Tangshan, inclusive of 13 % VAT.
HRC export offers rally for six consecutive weeks- The steel manufacturers have continued to raise their export offers which now stand at $630-635/t FoB China, jumped by $35/t in contrast with $595-600/t FoB basis towards the end of previous week.
Export offers surged on the back of rallying futures market and robust demand from domestic consumers. Secondly, demand from Vietnamese importers have increased amid domestic short-supply and a surge in demand from downstream sectors.
Domestic market prices shoot up to RMB 250-270/t to RMB 4,530-4,560/t (Eastern China) against RMB 4,280-4,290/t (Eastern China) on the back of robust downstream industry demand and increased spot market activities.
Hence, domestic market participants anticipate a further increase in prices in the near term which has led to an increase in restocking activities.
Rebar export offers remain competitive- The Chinese mills further increased rebar export offers by $5/t on the week to $540-545/t FoB amid an increase in production cost. Meanwhile, increased scrap prices have led to a surge in export offers of other exporting countries, which made Chinese offers lucrative for importers.
Domestic market prices also spiked by RMB 230/t w-o-w to RMB 4,200-4,230/t (Eastern China) against RMB 3,970-4,000/t (Eastern China). However, stockist seemed bearish amid concerns over seasonal slowdown in winters and refrained from restocking actively.
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