Chinese steel prices declined this week on weak demand, adverse weather conditions and the continuous downtrend in steel futures. Heightened fears over waning demand for steel and a crisis in the property sector appear to be worsening steel prices.
Steel inventory at key Chinese mills stood at 18.04 mnt in early July, up 6.49% m-om, as per China Iron and Steel Association (CISA) data. The average daily crude steel output of CISA-affiliated mills was recorded at 2.07 mnt in early July.
In addition to the above, China’s crude steel production fell by 3.3% y-o-y to 90.73 mnt in June. Production dropped 6% m-o-m compared with 96.61 mnt in May, according to National Bureau of Statistics (NBS) data. In H1CY’22, crude steel output decreased by 6.5% y-o-y to 526.88 mnt.
China’s national absolute price index registered a decline of 7.5% w-o-w to RMB 4,209/t ($623/t) and a decrease of 26.6% on y-o-y basis, as per Lange Steel data.
Monthly export-import data:
i) Steel exports stood at 7.55 mnt in June, down 3% m-o-m against 7.76 mnt in May.
ii) Steel imports dropped 2% m-o-m to 790,000 t in June as against 810,000 t in the previous month.
iii) Iron ore imports were recorded at 88.97 mnt in June, down 4% m-o-m compared with 92.52 mnt in May.
Product wise sentiments:
1. Spot iron ore prices down on week: Chinese spot iron ore fines Fe 62% prices opened at $105.8/t CNF China and was assessed at $96.6/t towards the weekend. Seaborne iron ore prices trended down on continued weakness in steel demand and poor seaborne buying interest.
According to sources, mills are finding it more cost-effective to sell expensive or quality iron ore products from long-term contract cargoes and buy them in smaller quantities at portside.
Iron ore inventory at major Chinese ports stood at 130.6 mnt this week, up 2.3 mnt from 128.3 mnt a week ago, as per SteelHome data.
a) Spot pellet premium down w-o-w: Spot pellet premium for Fe 65% grade pellets was assessed at $29.1/t, down from $29.65/t last week.
b) Spot lump premium down w-o-w: Spot lump premium stood at $0.1000/dmtu, down $0.1050/dmtu from last week.
Lump premiums fell slightly on lack of buying interest.
2. Coking coal prices fall w-o-w: Coking coal prices fell by $20/t w-o-w to $238/t FOB Australia as against $258/t a week ago. The decline stems from weak steel market sentiments in Asia despite the possibility that heavy rains in Australia might impact supplies.
3. China’s billet prices slump towards weekend: Steel billet prices in China’s Tangshan witnessed a sharp fall of RMB 520/t ($77/t) w-o-w following a decline in rebar futures. Prices stood at RMB 3,400/t ($503/t), inclusive of 13% VAT, on 15 July. According to SteelMint data, the SHFE rebar futures contract for October 2022 delivery closed at RMB 3,589/t ($531/t) on 15 July, falling sharply by RMB 607/t ($90/t) w-o-w.
4. HRC export offers plunge $42/t w-o-w: China’s HRC (SS400) export offers plunged $42/t w-o-w to $618/t FOB compared with $660/t a week back.
Weak demand weighed on market sentiments coupled with a sharp fall in HRC futures, pushing prices down by RMB 550/t ($81/t) to RMB 3,610/t ($534/t) in northern China as against RMB 4,160/t ($616/t) last week.
SHFE HRC futures contract for October delivery fell by RMB 550/t ($81/t) w-o-w to RMB 3,667/t ($543/t) on 15 July.
In addition, HRC stocks rose 3% w-o-w to 2.75 mnt on 15 July against 2.67 mnt last week, as per Lange Steel data.
China’s Baosteel has slashed monthly HRC, CRC and heavy plate prices by RMB 200/t ($30/t) for August sales on the back of subdued domestic demand amidst a seasonal lull and resurgence in COVID-19 infections.
5. Domestic rebar prices drop w-o-w: Domestic rebar prices dropped RMB 220/t ($33/t) to RMB 3,990/t ($590/t) in western China against RMB 4,210/t ($623/t) a week ago. Price fell due to unfavourable weather conditions in some parts of China resulting in slowing down of construction activities.
6. Shagang Steel rolls over long steel prices: China’s Shagang Steel rolled over long steel products prices for mid-July sales. Effective prices:
- Rebar(16-25mm): RMB 4,800/t ($710/t)
- Wire rods (6-10 mm): RMB 4,810/t ($712/t)
- Coiled rebar (8-10 mm): RMB 4,900/t ($725/t)
All prices are on ex-mill basis, including VAT.
7. Shagang Steel cuts scrap purchase prices: Shagang lowered scrap prices by RMB 150/t ($22/t) for all grades from 15 July. Post revision, prices of HMS (6-10mm) stand at RMB 2,770/t ($410/t) delivered to headquarters, including 13% VAT.
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