Chinese steel market exhibited mixed sentiments during the week. The Ministry of Finance finally annulled the 13% value-added tax (VAT) rebate on exports of 146 steel products from 1st May ’21 that include hot-rolled coil (HRC), wire rod and rebar as well as cold-rolled and galvanized sheets, to discourage steel exports and facilitate imports of raw materials.
This week, iron ore prices moved up along with HRC and rebar on increased buying ahead of the Labor Day holidays. Meanwhile, coking coal prices continued to remain stable.
China’s largest EAF steelmaker – Shagang Steel hiked scrap purchase price this week by RMB 50/t ($8) for all grades. The company is paying at RMB 3,540/t for HMS (6-10 mm) ($547), inclusive of 13% VAT, delivered to headquarters.
Product-wise market sentiments are mentioned below-
1. China spot iron ore prices up during the week- Chinese spot iron ore prices opened at $191.45/t, CFR China increased to $ 193.85/t, CFR China towards mid-week. The prices were hovering at over ten-year high levels due to a rise in infrastructure demand; the level was last witnessed during Feb ’11 at $196/t, CNF China. The current steel prices and margin suggest an expected continuous rise in the price trend. The price rise is favored by tight supply caused due to seasonal production reduction from Brazil and Australia in the last three months. Also, demand for high-grade iron ore continues with Chinese Government policies aimed at curbing its resurgent pollution problem observed in recent months.
Prices were supported by more end users procuring at portside ahead of the Labor Day holidays, which fall between May 1-5. The prices dropped to $186.45/t, CFR China towards the weekend on weaker demand outlook.
As per data compiled by SteelHome consultancy, iron ore inventory at major Chinese ports was recorded at 133.1 mn t as against at 135.9 mn t assessed a week ago.
- Spot pellet premium up w-o-w- Spot pellet premium for Fe 65% grade pellets assessed at $66.1/t as against $ 59.45/t assessed last week. Pellet prices strengthened on supply concerns from India due to transportation issues and continued strength in steel margins.
As per data compiled by SteelHome consultancy, pellet inventory at major Chinese ports recorded at 4.1mn t, down against 5.2 mn t last week. - Spot lump premium down w-o-w- Spot Lump premium was witnessed at $0.5700/dmtu as against $0.5850/dmtu assessed last week.
Seaborne lump premiums softened as some market sources expected supply to improve but there were still sources who indicated that current levels could still be supported if prices of other high-grade alternatives continued to trend higher. Lump premiums faced downward pressure on low stocks. However, sources expected that prices of lump premium may slow down until the stock level recovers. Lump inventory dropped to 18.5 mn t this week against 19.5 mn t a week before.
2. Coking coal prices remained stable w-o-w- Seaborne coking coal prices remained unchanged this week as the spot market continued witnessing limited trading activities with participants awaiting tender results for short-term market direction. The latest offers for the Premium HCC grade are assessed at around $110.00/t FoB Australia unchanged against last week.
However, the premium grade, in particular, has been edging down progressively on limited deals as buyers waited on the side lines despite adequate spot supply with May and June delivery cargoes.
3. Chinese billet prices rose w-o-w- This week, the Chinese domestic billet prices registered a w-o-w rise of RMB 40/t ($6/t). The rising rebar futures pulled up the domestic billet prices. Yesterday, the prices of commonly traded Q235 billet 150mm diameter settled at RMB 4,990/t ($771/t) in Tangshan, including 13 % VAT.
4. HRC export offers reported increase- Major mills are offering HRC for export at around $920-940/t FoB China basis as against $885-920/t FoB basis in the last week. Chinese Govt. has removed HRC export rebate from 13% to 0% with effect from 1st May which has further led to higher offers.
This week the domestic HRC market prices touched new highs since July 2008, the current price stand at around RMB 5,760-5,770/t (Eastern China), surging by RMB 160-170/t w-o-w against RMB 5,590-5,610/t (Eastern China) a week ago.
Reasons behind the price rise are mentioned below-
- Futures market gained momentum after the Tangshan Govt. ordered major mills to suspend their sintering equipment from Apr 25th-27th for controlling pollution.
- Market participants started to suspend their trading activities early on account of Labor Day holidays spanning 1st May until 5th May.
5. Domestic rebar offers up w-o-w- Rebar prices in the domestic market moved up by RMB 60-70/t w-o-w (Northern China) to RMB 5,170-5,200/t (Northern China) over bullish sentiments in the ferrous market as Tangshan officials were taking measures to control pollution along with restocking demand ahead of Chinese Labor Day break. Last week, the offer stood in the range of RMB 5,100-5,140/t (Northern China).
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