This week, the Chinese steel market illustrated mixed sentiments with the arrival of the rainy season, along with moderate buying interest due to volatility in the futures market.
Iron ore and steel futures in China continued to remain volatile on subdued steel demand in the rainy season. SHFE HRC futures Oct contracts closed at RMB 5,347/t ($831/t)
China’s crude steel output touched a new high of 99.50 mn t in May ’21. The output surged by 2% m-o-m and 6.6% y-o-y basis, according to the data released by the National Bureau of Statistics on 16 Jun’21.
Product-wise sentiments are mentioned below:
1. China spot iron ore prices: Chinese spot iron ore prices opened at $222.3/t CNF China for the week and decreased to $213.65/t, CNF China mid-week. However, the prices again increased towards the weekend to $217.30/t, CNF China. The prices increased on buying interest in mainstream medium-grade cargoes amid limited supply. High iron ore prices and demand, along with higher futures prices, have facilitated higher-cost producers to expand, as steel mills look to purchase high-grade raw materials that optimise efficiencies and lower carbon emissions. The further Chinese steel output curbs in recent days led to rising steel prices, supporting iron ore prices, as steel margins recovered.
However, as construction activities were affected by the wet weather, especially in southern China, sources expected steel and iron ore prices to face downward pressure.
As per data compiled by SteelHome consultancy, iron ore inventories at major Chinese ports were recorded at 124.6 mn t as against 126.25 mn t assessed a week ago.
Spot pellet premiums up w-o-w: Spot premiums for Fe 65% grade pellets were assessed at $69.05/t as against $64.2/t assessed last week. Seaborne iron ore pellet premiums inched higher on better demand and liquidity amid restocking interests from steelmakers.
Apart from lesser competition from domestic pellet producers, market sources also pointed to ongoing sintering cuts in Hebei and expectations of further environmental control measures in other regions to support pellet prices.
A mining accident in the province of Shanxi on June 10 put a question mark on the supply of domestic concentrates, which is the main feed in domestic pellet production. All underground iron ore mines in Shanxi were asked to stop production for safety inspections on June 11.
As per data compiled by SteelHome consultancy, pellet inventories at major Chinese ports were recorded at 3.5 mn t, against 3.6 mn t assessed last week.
Spot lump premiums up w-o-w: Spot lump premiums were at $0.7675/dmtu as against $0.7035/dmtu last week. Seaborne lump premiums gained support as sources saw limited supply of mainstream lumps and also since secondary prices remained firm. However, lump usage has been impacted because of increased moisture content.
2. Coking coal prices rise on supply concerns: Seaborne coking coal export prices sustained their upward momentum this week, on consistently strong buying interest for August loading cargoes amidst supply tightness. The latest price for the premium HCC grade is assessed at around $178/tonne (t) FoB Australia, up by $6/t w-o-w as against $172/t FoB a week ago.
3. Chinese domestic billet prices down w-o-w: The Chinese domestic billet prices settled at RMB 4,940/t ($766/t), ex-Tangshan, including 13% VAT, on 18 June ’21, down by RMB 70/t ($11/t) on a w-o-w basis amidst the volatile SHFE rebar futures.
4. HRC export offers fell w-o-w: Chinese mills are offering HRCs for exports at $900-910/t FoB China, down by $5-10/t w-o-w as against $910-915/t FoB basis last week. Overseas buyers have moved to the sidelines due to the unclear status on export tariffs.
Domestic HRC prices were weighed down by the weak performance of the futures market during the week. Alongside this, buying activity remained low this week due to the Dragon Boat Festival holidays.
HRC prices have been slashed by RMB 110-120/t w-o-w to RMB 5,500-5,530/t (Eastern China) as against RMB 5,610-5,650/t (Eastern China) a week ago.
5. Domestic rebar offers slide w-o-w: Rebar producers have cut prices by RMB 140-150/t w-o-w to RMB 4,930-4,970/t (Northern China) in comparison to RMB 5,070-5,120/t (Northern China) in the previous week. Sellers have started to destock on fear of drop in end-user demand due to losses in the futures market.
6. Shagang Steel hikes scrap purchase prices by $13/t: On 16 Jun ’21, China’s largest EAF steelmaker, Shagang Jiangsu Steel, announced its second hike of the month over tight material availability and rising prices of finished steel.
The producer raised scrap purchase prices by RMB 80/t ($13) for all grades. Now, the revised prices for HMS (6-10 mm) stand at RMB 3,770/t ($589), inclusive of 13% VAT, delivered to headquarters.
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