The Chinese steel market this week exhibited mixed sentiments over persistent uncertainty in the country’s export policy. Moreover, adverse weather conditions with heavy rainfall in most provinces along with the ongoing centenary celebrations of the Chinese Communist Party have resulted in logistical barriers.
Product-wise sentiments:
1. China spot iron ore prices w-o-w: Chinese spot iron ore prices opened at $220.05/t CNF China for the week and decreased to 217.30/t, CNF China towards the weekend. The prices decreased as weak Chinese steel demand weighed on iron ore demand outlook.
Steel mills in northern China had reduced production at blast furnaces for the week to ensure clean air ahead of the centenary celebrations of the founding of the Chinese Communist Party. Some mills in northern China’s Shanxi province, as well as the cities in Tangshan and Handan in Hebei province, had been required by local governments to suspend production at all blast furnaces from 29 Jun to 1 Jul, according to market sources. Some traders in China are expecting sintering cuts to continue throughout Jul ’21 which, in turn, are expected to weaken demand for iron ore further.
A few sources shared that the switch towards a lower Fe blending mix is underway to manage costs and lower production,
However, high domestic coke prices are limiting any upside for fines with high impurities.
As per data compiled by SteelHome consultancy, iron ore inventory at major Chinese ports was recorded at 124.45 mn t as against 123.95 mn t assessed a week ago.
Spot pellet premium up w-o-w: Spot pellet premium for Fe 65% grade pellets were assessed at $76.65/t as against $68.65/t last week. Seaborne pellet premiums strengthened amid supply concerns for low-alumina pellet options. Prices for Indian pellets with higher alumina were stagnant due to comparatively lower demand as higher coke prices in China reduced mills’ tolerance toward impurity content, including alumina.
Overall demand for pellets has remained strong, based on high flat steel prices and shortages in DR-grade pellets for burgeoning DRI capacity. Disruption in Canadian supplies, especially over April and May, because of a labour strike and port damage tightened pellets and concentration.
As per data compiled by SteelHome consultancy, pellet inventory at major Chinese ports recorded at 3.9 mn t, against 3.6 mn t assessed last week.
Spot lump premium down w-o-w: The spot lump premium was t $0.7300/dmtu as against $0.7550/dmtu last week. As per market sources, the blending ratio of lump would be the first to drop in order to manage steelmaking costs due to poor cost competitiveness.
Seaborne lump premium faced headwinds amid waning end-user demand. Mills were heard reducing lump usage due to increased handling difficulties during the ongoing rainy season.
2. Coking coal prices up w-o-w: Seaborne coking coal prices have risen on firm demand amid tight supply. Australian premium hard coking coal prices rose higher this week, on consistently strong buying interest amid supply tightness. The latest price for the premium coking coal grade is assessed at $199/t FoB Australia, up by $15/t as against $184/ t on FoB basis a week ago. Short-term prices are expected to remain supported as supply tightness is unlikely to ease anytime soon.
3. Domestic billet offers: According to data maintained with SteelMint, the Shanghai Futures Exchange (SHFE) rebar futures Oct ’21 contracts on 02 Jul settled with a d-o-d drop of RMB 22/t ($3/t) to RMB 5,124/t. Domestic billet prices in China stood at RMB 4,910/t ($756/t) in Tangshan, including 13% VAT. On the other hand, price indications for imported billets into China are heard at around $660-665/t, CFR.
4. HRC export offers remain flat w-o-w: HRC export offers have remained flat for the second consecutive week over continued uncertainty regarding export policy of China. HRC export offers from steel mills stood at $940-950/t FoB China.
Offers remain moderate due to:
- Increased competition from Russia over cheaper position cargoes is keeping Chinese sellers on the sidelines.
- Demand from Southeast Asia is weak due to recurrence of Covid-19 cases.
- Overseas buyers from other regions are on the sidelines, too, waiting for clarity on price direction.
In the domestic market, HRC stands at RMB 5,430-5,480/t (eastern China), up by RMB 30-50/t as against RMB 5,380-5,450/t (eastern China) in the preceding week.
- Prices rose on production cuts expected in H2 CY ’21, boosting futures market sentiments.
- Sustained efforts from the Chinese authorities to cut carbon emissions are supporting steel prices.
- Authorities in Jiangsu and Anhui provinces have ordered steelmakers to keep their crude steel output this year similar to levels achieved in 2020; however, no such official declaration has been made as yet.
However, towards the weekend, market sentiments trended down with respect to poor take-off from mills and logistical curbs in the northern provinces.
5. Domestic rebar offers up w-o-w: Future market gains in the domestic market early this week provided thrust to rebar prices by RMB 20-30/t w-o-w. Current week prices stand at RMB 4,780-4,820/t (northern China) as against RMB 4,750-4,800/t (northern China) a week ago. Supply concerns amid logistical barriers have led to an increase in quotes by sellers. However, adverse weather conditions and likely production curbs due to narrowing steel margins keep buyers on the edge.
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