This week, Chinese semi-finished and finished steel prices declined because of sluggish downstream demand. Furthermore, production curb norms are getting stricter with a focus on the Olympics and Paralympics in Feb-Mar’22.
China’s crude steel output dropped by 7.6% to 86.76 million tonnes (mn t) in Jul’21 as compared to 93.88 mn t a month ago, as per latest data released by the National Bureau of Statistics (NBS).
China’s crude run of mine (ROM) fell to 79.93 mn t in Jul’21 as against 87.87 mn t seen in June’21, according to National Bureau of Statistics data.
Product-wise sentiments
1. China spot iron ore prices down w-o-w: Prices of Chinese spot iron ore fines of Fe62% grade opened at $162.5/tonne (t) CNF China this week and decreased to $139.1/t, CNF China towards the weekend. Iron ore prices collapsed as the demand outlook turned weaker on bearish steel data from China. As per data maintained with SteelMint, China’s crude steel production saw the first y-o-y decline in Jul’21, which was slightly higher than the level seen in the same period in 2019, indicating that steel producers have significantly reduced their capacity under the pressure of production cuts. Hence, decreasing steel output has kept demand for raw materials depressed.
Several Chinese mills were heard to have shut down their blast furnaces or were planning maintenance, and ended up with an excess of iron ore cargoes loading August and September to offer into the spot market. The construction steel market has also turned negative in China, weighing on iron ore demand, due to poorer-than-expected real estate investment figures and concerns over the spread of the delta variant in China.
As per data compiled by SteelHome consultancy, iron ore inventory at major Chinese ports was recorded at 128.8 mn t as against 127.2 mn t assessed a week ago.
a) Spot pellet premiums up slightly w-o-w: Spot premiums for Fe 65% grade pellets were assessed at $46.4/t as against $45.5/t assessed last week. The weakness in seaborne iron ore pellet prices continued on scant buying interests from China. Although steel margins remained healthy, production curbs prompted mills to prioritise cost saving over productivity.
Pressure from the Chinese government to reduce steel output in 2021 could result in decrease in steel mills’ production in Aug’21. As per data compiled by SteelHome consultancy, pellet inventory at major Chinese ports was recorded at 3.8 mn t, as against 3.6 mn t assessed last week.
b) Spot lump premiums down w-o-w: Spot lump premiums were at $0.2000/dmtu as against $0.2550/dmtu last week. Weakness in seaborne lump premiums persisted as demand continued to wane. Chinese steel mills still had excess lump stocks on hand due to the reduced blast furnace operations.
2. Coking coal offers up w-o-w: Seaborne coking coal prices continued to increase this week on the back of several deals concluded in the ex-China market amidst persistent supply tightness. Besides, exportable cargoes of seaborne coking coal are still limited, without active offers for PLV HCC, according to market sources.
Meanwhile, domestic supply tightness showed no signs of improvement in China and market participants refrained from purchasing seaborne Australian coking coal, waiting for the outcome of a buy tender recently issued by a major steelmaker. US traders of coking coal are focusing on supplying to China in anticipation of higher realisations.
The latest price for the premium HCC grade is assessed at around $229.00/tonne (t) FoB Australia, which was $222.25/t FoB basis a week back.
3. China’s domestic billet prices plunge RMB 230/t w-o-w: Steel billet prices in China’s Tangshan fell sharply by RMB 230/t ($35/t) w-o-w. Domestic billet prices stood at RMB 4,880/t ($752/t), inclusive of 13% VAT. According to data maintained with SteelMint, China’s rebar futures contract for Jan’22 delivery closed at RMB 5,100/t ($785/t) after falling to RMB 5,017/t earlier this week.
4. HRC export offers fall $10/t w-o-w: Lack of clarity on the export tax policy besides increased sea freight rates and port congestion due to stricter norms of Covid have pushed buyers and sellers to the sidelines. Mills are offering HRCs for export at around $1,000-1,020/t FoB China, down by $10/t compared with $1,000-1,030/t FoB in the previous week.
Sluggish downstream demand along with several production restrictions weighed down HRC prices in the domestic market. Prices, this week, stand at RMB 5,620-5,670 (eastern China), down RMB 110-130/t as against RMB 5,750-5,780/t (eastern China) a week ago.
5. Domestic rebar prices down w-o-w: Domestic rebar prices dropped by RMB 160/t to RMB 5,010-5,050/t (northern China) as against RMB 5,170-5,210/t (northern China) a week ago. Prices fell primarily due to a slump in rebar futures. However, towards the weekend, buying interest improved on attractive prices.
6. Shagang Steel announces third scrap purchase price cut for Aug’21: The largest EAF steelmaker, Shagang Jiangsu Steel Jiangsu Shagang Group, has announced a scrap purchase price cut for the third time in Aug’21. The steel producer has cut prices by RMB 50/t ($8/t) for all grades effective from 19 Aug’21, sources informed. After revision, the recent price for HMS (6-10 mm) stands at RMB 3,700/t ($570), inclusive of 13% VAT, delivered to headquarters.
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