Bearish steel demand outlook, falling HRC and rebar prices on the Shanghai Futures Exchange (SHFE), and the depreciation of the Chinese currency weighed on steel prices this week. However, coking coal prices gained support from an uptick in buying interest.
Steel inventory at CISA mills stood at 17.71 mnt in mid-October 2022, up 1.40 mnt or 8.59% m-o-m, as per latest data. Compared to the beginning of the year, inventory increased by 6.42 mnt or 56.84% and rose by 4.87 mnt or 37.92% compared to the same period last year.
The average daily crude steel output of CISA-affiliated mills stood at 2.06 mnt in mid-October.
China’s crude steel production rose 4% m-o-m to 86.95 mnt in September as against 83.87 mnt in the previous month.
The China Iron and Steel Industry Association (CISA) has proposed the government to partially ease meaures to control exports, subivide the export tariff codes (HS codes) and refund value-added taxes (VAT) on exports of value-added goods.
September export-import data
i) China’s steel exports fell by 19% m-o-m to 4.98 mnt in September as against 6.15 mnt in August.
ii) Steel imports stood at 891,000 tonnes (t) in September, marginally down from 893,000 t in the previous month.
iii) Iron ore imports were recorded at 99.70 mnt in September, up 4% m-o-m against 96.20 mnt in August.
Product wise sentiments:
1. Iron ore prices decrease on slow demand: Chinese spot iron ore fines (Fe 62%) prices opened at $89.5/t CNF China this week and was assessed at $81.85/t CNF towards the weekend. Spot prices of iron ore continued to edge down due to falling steel prices amid weak demand.
A few sources said that the demand-side factor seemed to outweigh the supply-side factor, especially as demand for higher-grade iron ore products continued to face headwinds, while Chinese steel mills were making huge losses.
Iron ore inventory at major Chinese ports stood at 132 mnt on 27 October, up by 0.8 mnt as against 131.2 mnt a week ago, as per data maintained by SteelHome.
a) Spot pellet premium inches down on week: The spot premium for Fe 65% grade pellets was assessed at $24.10/t, down as against $24.25/t last week.
Pellet premiums fell on the week as sluggish demand in China stemming from a bearish steel sector outlook continued to weigh on prices.
b) Spot lump premium down w-o-w: The spot lump premium stood at $0.1560/dmtu, down slightly as against $0.1580/dmtu last week.
2. Coking coal prices up on supply tightness: Coking coal prices rose by $13/t w-o-w to $312/t FOB against $299/t FOB. Prices have risen as buying interest from Indian has improved marginally. This, coupled with supply tightness from Australia due to wet weather, is supporting coking coal prices.
3. China’s billet prices fall on weak sentiments: Steel billet prices in China’s Tangshan fell sharply by RMB 100/t ($14/t) w-o-w. Prices stood at RMB 3,510/t ($484/t), including 13% VAT on 28 October. Bearish market sentiments, the drop in futures, finished steel and iron ore prices have weighed on domestic billet prices. According to data maintained with SteelMint, China’s SHFE rebars futures contract for January 2023 delivery closed at RMB 3,490/t ($481/t) on 28 October, a sharp fall of RMB 140/t ($19/t) w-o-w.
4. HRC export offers down w-o-w: China’s HRC export offers edged down by $5/t wo-w to $575/t FOB China. Appreciation of the dollar against other currencies and falling Chinese HRC futures continued to keep buyers on the sidelines, weakening buying interest amongst importers.
Domestic HRC prices declined sharply by RMB 150/t ($21/t) to RMB 3,720/t ($514/t) compared with RMB 3,870/t ($534/t) a week ago due to weak domestic demand. The traditional peak season for steel demand (September-October) is nearing its end, which dampened market sentiments further.
HRC futures on the Shanghai Futures Exchange (SHFE) fell by RMB 145/t ($20/t) w-o-w to RMB 3,530/t ($487/t) as on 28 October.
5. Domestic rebar prices fall w-o-w: China’s domestic rebar prices dropped RMB 120/t ($17/t) w-o-w to RMB 3,760/t ($519/t) from RMB 3,880/t ($535/t) last week. A pessimistic demand outlook for November due to colder weather, led to destocking by market participants. Moreover, demand improved as buyers turned active in replenishing inventories as offers for rebar were lucrative.
China’s rebar production rose by 17.4% y-o-y to 21.41 mnt in September, as per National Bureau of Statistics (NBS) data.
6. Shagang cuts scrap purchase prices: Shagang Steel has lowered scrap prices by RMB 100/t ($14/t) for purchase of all grades of scrap. Post revision, HMS (6-10 mm) prices are at RMB 2,710/t ($3,740/t) delivered to headquarters, including 13% VAT, effective from 28 October.
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