China’s domestic steel market prices continued to head south amid low demand and volatility in the futures market.
The stringent restrictions on blast furnace and sintering activities weighed on iron ore prices. A decline in market activities amid adverse weather conditions also pulled down prices of hot rolled coils (HRC) and rebar.
Monthly export-import highlights
i) Steel export volumes stood at 4.50 million tonnes (mn t) in Oct’21, down 9% as against 4.92 mn t in Sept’21.
ii) Steel import volumes fell by 10%, m-o-m, to 1.13 mn t in Oct’21 from 1.26 mn t a month back.
iii) Iron ore (including pellets) imports were recorded at 91.61 mn t in Oct, declining by 4% against 95.61 mn t a month ago.
Product-wise sentiments
1. China spot iron ore prices: Chinese spot iron ore fines Fe 62% prices opened at $93.85/t CNF China for the week and decreased to $89.75/t, CNF China towards weekend. However, the prices had rebounded to $94.2/t, CNF China mid-week. Demand from Chinese end-users is low due to ongoing steel production curbs and stricter sintering and blast furnace operation restrictions in the northern stretches of China. Previously, when steel margins and coke prices were high, mills were using high-grade ore and direct blast furnace feed such as pellets and lumps.
However, now that margins and coke prices are both coming off, mills may switch to blends of low-grade iron ore fines. It is expected that amongst the low, medium and high-grade fines, the demand for high-grade fines would be affected the most and demand for low-grade fines could improve amidst weakening steel margins. Also, demand for discounted medium-grade fines is expected to rise.
Iron ore inventory at major Chinese ports increased to 147.6 mn t this week as against 145.1 mn t a week ago, as per data maintained by SteelHome.
a) Spot pellet premium down w-o-w: Spot pellet premium for Fe 65% grade pellets were assessed at $66.2/t, down $10.5/t w-o-w. Production curbs imposed in China have resulted in increased preference for high-grade iron ore. However, the expected winter sintering restrictions may boost preference for lumps over pellets amidst high pellet offers in the market. Also, falling steel margins resulted in reduced pellets demand. Total pellets inventory at China’s major ports were recorded at 4.3 mn t as against 4.1 mn t, a week ago.
b) Spot lump premium down w-o-w: Spot lump premium was at $ 0.1190/dmtu as against $0.2200/dmtu a week ago. Some sources expected further downside to lumps demand in the near term, although weakening coke prices and winter sintering controls might provide some support.
2. Shagang lowers scrap procurement prices by $8/t: Leading Chinese steelmaker Shagang Jiangsu Steel announced further reduction in its scrap procurement price for all grades by RMB 50/t ($8/t) for Nov’21 deliveries. After the revision, the price of HMS (6-10mm) stands at RMB 3,420/t ($536/t), including 13% VAT as on 10 Nov’21. Scrap demand of mills has been affected due to steel production curbs and a weak outlook.
3. Coking coal prices down $4/t: Seaborne coking coal prices saw a marginal correction of 2% over the past week. However, prices of the weaker coal grades such as PCI and semi-soft are holding firm due to continued supply tightness caused by heavy rainfall in Queensland. In the Chinese coking coal market, supply tightness and restocking demand continued to provide support to the rising CNF China prices which stand at around $530/t at present.
The latest price for the premium HCC grade is assessed at around $399/t FOB Australia, down $4/t as against $403/t a week back.
4. China’s billet prices plunge towards weekend: Steel billet prices in China’s Tangshan witnessed a huge drop of RMB 510/t ($80/t), w-o-w. Domestic billet prices stood at RMB 4,290/t ($672/t), inclusive of 13% VAT. According to data maintained with SteelMint, China’s SHFE rebar futures contract for Jan’22 delivery closed on 12 Nov’21, at RMB 4,249/t ($666/t), remaining range-bound w-o-w.
5. HRC export offers slide $70/t w-o-w: Chinese mills have lowered their offers by $70/t to $810-820/t FOB China as against $860-890/t FOB in the previous week. Overseas demand slowed as buyers turned observant because of unclear price direction amid falling domestic market prices and possibility of export tax imposition by the government.
In the domestic market, HRCs are being traded at RMB 4,760-4,810/t (eastern China), down RMB 190/t as against RMB 4,950-5,000/t (eastern China) last week. Decline in HRCs futures, bleak downstream sales during the week led to a decline in prices. However, towards the weekend futures picked up after hitting a nine-month low. SHFE HRC Jan contract moved up RMB 34/t d-o-d to RMB 4,629/t .
Also, leading Chinese steel major Baosteel announced a cut of around RMB 3,00/t ($47/t) m-o-m in the list price of HRCs on 10 Nov’21, as a result of stringent production curbs and weak demand.
6. Domestic rebar prices down w-o-w: Rebar manufacturers are quoting prices at RMB 4,520-5,600/t (northern China), down RMB 220-260/t compared with RMB 4,780-4,820/t in the previous week. Prices have fallen due to slowdown in construction activity amidst adverse weather conditions which weakened demand for rebar along with a fall in rebar futures.
7. Shagang Steel reduces rebar prices by RMB 450/t ($70/t): China’s leading steel producers and the country’s largest private steel enterprise, Shagang Steel, cut construction steel prices for mid-Nov’21 sales. Below are revised prices that came into effect from 11 Nov’21.
- Rebar (16-25mm): RMB 5,100/t ($796/t), down RMB 450/t
- Wire rods (6-10mm): RMB 5,260/t ($821/t), down RMB 400/t
- Coiled rebar (8-10mm): RMB 5,350/t ($835/t), down RMB 400/t
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