The Chinese steel market saw negative sentiments this week due to falling steel futures as the government has intensified efforts to rein in surging prices. Also, continuous efforts to improve the country’s carbon footprint by controlling production resulted in bearish sentiments.
Prices of raw-materials as well as finished steel dropped this week.
Meanwhile, China’s crude steel output touched new highs at 97.85 mn t in Apr ’21 against 94.02 mn t in Mar ’21, up by 4% month-on-month (m-o-m), as per data released by the National Bureau of Statistics (NBS).
Product-wise market sentiments:
1. China spot iron ore prices down: Chinese iron ore spot prices opened at $217/t CNF China on 17 May ’21 and settled at $ 200.10/t, CNF China. The retreat in steel prices weighed on steelmaking raw material (iron ore) prices. However, prices increased mid-week to $223.75/t, CNF China as buying interest in low-grade fines increased. However, rising iron ore prices made trade difficult. This is because the current still margins still warrant the usage of medium and high-grade fines.
As per data compiled by SteelHome consultancy, iron ore inventory at major Chinese ports was recorded at 128.35 mn t as against 128.3 mn t assessed a week ago.
- Spot pellet premium up w-o-w: Spot premium for Fe 65% grade pellets were assessed at $63.8/t as against $58.55/t last week. The pellet premiums rebounded on relative stability against underlying 62% Fe iron ore fines prices. There were less seaborne pellet offers in the week with sellers staying on the side-lines waiting for clarity on the market as iron ore derivatives fell sharply on the week. Iron ore pellet contract demand looks set to remain strong on support from steel orders and margins, as spot iron ore premiums have widened and prices rose to record levels in May. As per data compiled by SteelHome consultancy, pellet inventory at major Chinese ports were recorded at 3.8 mn t, stable w-o-w.
- Spot lump premium down w-o-w: Spot lump premiums were seen at $0.5200/dmtu as against $0.5235/dmtu assessed last week. Lump premiums continued to face headwinds. Market sources saw further weakness in lump premiums heading into June, as demand usually decreases due to the onset of the monsoon season in the southern part of China. Supply of the mainstream Australian lump remained low.
2. Coking coal offers remained stable: Seaborne coking coal prices have remained range-bound this week on the back of increased spot volatility in ex-China markets.
Presently, however, the Indian market outlook for spot buying of imported coking coal is seen as modest because end-users are well stocked with as much as 60 days’ inventory at ports and plants.
The latest offers for the Premium HCC grade are assessed at around $114/t FoB Australia, unchanged against last week.
3. Domestic billet offers down w-o-w: Chinese domestic billet prices fell by RMB 520/t ($81/t) w-o-w, owing to volatile SHFE rebar futures which settled with a w-o-w drop of RMB 529/t ($82/t) at RMB 5,112/t ($795/t), on 21 May ’21. The prices of commonly traded Q235 billets of 150mm diameter were reported at RMB 5,150/t ($800/t) ex-Tangshan, including 13% VAT.
4. HRC export offers fluctuate towards weekend: At the beginning of the week Chinese mills offered HRCs for exports at around $1,060-1,070/t FoB China. Meanwhile, tier-I mills continued to offer at $1,100/t FoB China.
However, towards the weekend, major steelmaker Rizhao Steel dropped its HRC offers by around $50/t to $1020/t FoB. Also, few other mills are offering HRC at $980-990/t FoB.
Domestically, HRCs are being traded at RMB 5,670-5,680/t (Eastern China), significantly contracted by RMB 490-770/t w-o-w basis as against 6,160-6,450/t (Eastern China) a week ago.
Factors driving the market
- Chinese officials issued health warnings because fresh cases of Covid-19 have been found in two cities in China.
- Low buying interest among stockists as well as end-users.
- In addition to the above, Tangshan municipal government ordered steel mills to suspend their sinter equipment for the first 10 hours starting from the midnight of 18-21 May ’21 to improve the quality of air.
- Further, there have been rumors’ that Chinese officials might impose export tariffs on certain steel products, including HRCs, which will result in reducing HRC exports and subsequently lowering production rate by the mills. However, no official announcement has been made until now.
5. Domestic rebar offers down w-o-w: In the domestic market, rebar offers moved down by RMB 730-750/t w-o-w basis to RMB 5,400-5,450/t (Northern China) compared with RMB 6,150-6,180/t (Northern China) last week.
The prices dropped due to adverse weather conditions in several parts of China which hampered construction and transportation activities and subsequently lowered the demand for rebar.
6. Shagang Steel slashes scrap purchase prices four times: Shagang Steel reduced its scrap procurement prices by a total of RMB 330/t ($51/t) this week for all grades. Currently, the price for HMS (6-10 mm) stands at RMB 3,860/t ($600), inclusive of 13% VAT, delivered to headquarters. Lower bids for raw materials due to weakening steel prices and falling local billet prices have resulted in a continuous drop in scrap prices.
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