This year Chinese steel market remained positive in terms of steel prices and steel output. Higher steel prices pushed mills to generate more output and earn higher profit margins. However sentiments weakened in Q4 CY18 with decline in prices and shrink in margins.
USA tariffs combined with winter production cuts to curb pollution and excess steel output remained a major concern in China in CY18.
1. Chinese mills increased apetitite for high grade ore and pellets in Aug-Sept’18 amid fall in global pellet supply. This resulted in spot pellet premium to reach peak levels. However with steel prices witnessing downturn in Q4, mills preferred going with low grade ore. Domestic iron ore production fell however with few mines in Hebei increasing output, ROM production in China picked up in oct’18.
2. Coking coal price increases in CY18 moved up by 9% to USD 219.7/MT CNF China compared to USD 200/MT CNF basis amid tight supply and logistics constraint in Australia.
3. Domestic scrap prices in China upsurged by nearly 40% Y-o-Y in CY18 vs CY17 over increased consumption by mills. Meanwhile Chinese customs authority announced stricter customs system from 1st Aug’18 over smuggling of scrap and waste steel which resulted in sharp fall in scrap export volumes from China.
4. Chinese flat steel export offers witnessed uptrend following hike in domestic prices. On an average basis nation’s HRC export offers stood at USD 550/MT, FoB in CY18 compared to USD 502/MT, FoB in previous year. However since October Chinese export offers fell significantly over weak buying from major importing nations.
5. Similarly Chinese re-bar export offers also jumped by 12% in CY18 against CY17 over higher domestic prices. Mills increased proportion of Venadium in rebar as per govt’s instructions for improving rebar quality. However by the year end prices witness decline amid seasonally low demand and weak construction activities in winters.
6. Imported Manganese ore prices jumped by 23% in CY18 to USD 7.28/MT CFR China.However imports of chrome ore move down in CY18.
USA-China reached 90 day ceasefire trade dispute- As per reports, The United States and China reached a 90-day ceasefire in a trade dispute. The breakthrough came at Group of 20 summit in Buenos Aires. Trump has imposed import taxes on USD 250 billion in Chinese products – 25% on USD 50 billion worth and 10% on the other USD 200 billion.
What to expect from Chinese steel industry in CY19- As per market reports of China Metallurgical Industry Planning & Research Institute, Chinese steel demand is anticipated to remain soft in CY19 and fall by 2.4% Y-o-Y in CY19. It is expected that Chinese steel performance will remain bleak amid lower steel consumption in nation’s auto industry combined with decline in property investment and construction sectors.
| Commodity | Delivery | Size/ Grade |
Unit Prices | CY 18 |
CY 17 |
Y-o-Y (%) | Remark |
| Coking coal | FoB Australia | Premium HCC |
USD/MT | 205.76 | 188.92 | 9% | Supply tightness on logistics constraints and bad weather conditions kept prices high |
| Coking coal | CNF China | Premium HCC | USD/MT | 219.7 | 200.92 | 9.35% | Demand from China remained supportive and high ocean rates kept prices high |
| Iron ore | CNF China | Fines, 62,Australia | USD/MT | 70 | 71 | -1% | Demand for high grade ore peaked in CY18, however later the year mills shifted to low grade ore amid falling steel margins |
| Iron ore | CNF China | Lumps, 64/63, South Africa |
USD/MT | 88 | 81.61 | 8% | |
| Pellet | FoB India | 6-20 mm,Fe 64% | USD/MT | 111 | 93.53 | 19% | Chinese mills raised demand for pellets amid environmental issues & lower domestic pellet production in China |
| Pellet | CNF China | 6-20 mm, Fe 65%, Brazil |
USD/MT | 136 | 105.16 | 29% | |
| Domestic Scrap | ex-Works | HMS 6-10 mm, including VAT | RMB/MT | 2,459 | 1,770 | 39% | Domestic scrap consumption increased sharply. Scrap exports fell on tighter control over smuggling case |
| Manganese Ore | CNF China | Lump, Mn:44%, Gabon | USD/DMTU | 7.28 | 5.9 | 23.4 | – |
| Chrome Ore | CNF China | Conc 40-42%, S. Africa, | USD/MT | 193 | 246.54 | 21.7% | – |
| Billet | FoB China | 150*150mm, Q235 | USD/MT | 520 | 465 | 12% | Very limited Billet export offers from Chinese mills were reported. However towards year end mills booked export deals to SE Asia on sharp decline in domestic offers |
| Rebar | FoB China | Commercial
grade |
USD/MT | 550.76 | 488.26 | 12.80% | High domestic prices prevented mills from lowering export offers. Export offers fell drastically in Q4 CY18 amid decline in domestic prices as well as lowered bids from importing countries |
| Wire rod | FoB China | 6.5mm | USD/MT | 566.62 | 500.07 | 13.30% | |
| HRC | FoB China | 2.5mm ASTM A36 | USD/MT | 550 | 502 | 10% | |
| CRC | FoB China | 1.0mm SPCC | USD/MT | 615 | 557 | 10% | |
| Plates | FoB China | 5-10mm, Commercial grade | USD/MT | 586 | 495 | 18% |
Source- SteelMint Research
China Iron & Steel Statistics CY18 vs CY17
| Particulars | Country | CY18 | CY17 | Y-o-Y (%) |
| Production | ||||
| Crude Steel | China | 930.96 | 831.7 | 12% |
| Iron Ore Production | China | 787.63 | 1321.6 | -40% |
| Imports | ||||
| Coal | China | 67 | 69.4 | -3% |
| Iron Ore | China | 1060.7 | 1075 | -1% |
| Ferrous scrap | China | 1.31 | 2.32 | -44% |
| Exports | ||||
| Steel | China | 69.72 | 75.41 | -8% |
| Ferrous scrap | China | 0.34 | 2.23 | -85% |
Qty mentioned above are in Million tonnes
Fig of CY18 are estimated figures*
Source- SteelMint Research
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