The Chinese domestic market showed a positive trend throughout the week over the recent announcement of production cuts which resulted in an increase in finished steel prices. Also, raw material and finished steel prices were on an uptrend following increased futures prices.
However, demand continued to remain lacklustre as the adverse weather conditions kept raising hurdles in construction and allied activities.
China’s key steel statistics for Jun ’21
- Crude steel production was down by 6% m-o-m to 93.88 million tonnes (mn t).
- China’s finished steel exports rose 23% m-o-m to 6.458 mn t.
- Finished steel imports rose 4% m-o-m to 1.252 mn t.
- Iron ore imports remained stable at 89.41 mn t.
Product-wise sentiments
1. China spot iron ore prices rise w-o-w: Chinese spot iron ore prices opened at $218.45/tonne (t) CNF China for the week and increased to $222.30/t, CNF China towards mid-week. Prices fell towards the week-end to $221.10/t, CNF China. Some end-users were looking for discounted or non-mainstream medium-grade fines, as they became increasingly cost-conscious. Although steel margins improved a little, production curbs in the second half of the year would most likely inhibit mills’ desire to lift productivity.
Sources said that blending lower Fe grades is underway to manage costs amid lower production. However, high domestic coke prices are limiting any upside for fines with high impurities. As per data compiled by SteelHome consultancy, iron ore inventory at major Chinese ports was recorded at 129 mn t as against 127.3 mn t assessed a week ago.
- Spot pellet premiums down w-o-w: Spot pellet premiums for Fe 65% grade pellets were assessed at $63.45/t as against $68.5/t last week. The iron ore pellet market continued to be dull on subdued demand and cheaper lump premiums. Even as sintering controls are likely to support direct feed usage, the steep drop in lump premiums will pose a competition for pellets. As per data compiled by SteelHome consultancy, pellets inventory at major Chinese ports was recorded at 4.1 mn t, stable on a weekly basis.
- Spot lump premiums fall w-o-w: Spot lump premiums were at $0.5500/dmtu as against $0.6400/dmtu last week. Seaborne lump premiums dropped further amidst lower mainstream lumps usage among end-users to manage costs. The emission control measures in the second half of the year are expected to hamper overall iron ore demand but may smoothen drop in lump premiums as direct feeds are usually favoured under strict environmental controls. Lump premiums fell sharply on rising supply and reduced demand due to end-users reselling contract volumes.
2. Coking coal offers rise on limited availability: Seaborne coking coal prices continued rising on firm ex-China demand. Australian premium hard coking coal (HCC) prices increased further this week on the back of healthy demand from the China markets, coupled with limited spot availability of premium cargoes with Aug’21 deliveries.
The latest prices for the premium HCC grade are assessed at around $211.50/t FoB Australia as against $206/t FoB basis a week ago.
3. Domestic billet prices head north: According to data maintained with SteelMint, the Shanghai Futures Exchange (SHFE) rebar futures Oct’21 contracts on 16 Jul’21 closed at RMB 5,559/t ($859/t), up RMB 13/t ($2/t) d-o-d. Tracking the hike in futures, domestic billet prices in China stood at RMB 5,140/t in Tangshan, including 13% VAT, climbing by RMB 120/t ($19) on a w-o-w basis.
4. HRC export offers up $10/t w-o-w: Chinese mills have upped their export offers by $10/t to $930-950/t FoB China as against $920-940/t FoB basis a week ago. Gains in the domestic market propelled traders to raise their export offers.
However, it is anticipated that steel mills shall limit their export allocations to cater to the domestic market due to production cuts. This might keep export offers firm in the upcoming weeks.
In the domestic market, HRC prices stood at around RMB 5,860-5,900/t (eastern China), up by RMB 130-160/t w-o-w in comparison with RMB 5,700-5,770/t (eastern China) a week ago. Steel prices remained supported on expectations of lower production. However, demand continued to be weak because of an ongoing seasonal lull. In addition, the futures market also picked up mid-week following the recently confirmed news on expectations of a drop in steel production in the second half of 2021.
The leading Chinese steel producer, Baoshan Iron and Steel (Baosteel), rolled over prices for the second consecutive month for most of its steel products for Aug’21 shipments.
5. Domestic rebar prices rise w-o-w: Domestic rebar prices moved up by RMB 110-120/t w-o-w to RMB 5,070-5,120/t (northern China) as compared to RMB 4,690-5,000/t (northern China) in the previous week. Prices picked up on the back of production cuts announced in several provinces in order to reduce carbon emissions. This, in turn, boosted market sentiments, leading to a rise in the futures market.
“Steel production dropped sharply in early-Jul’21, posting a second consecutive 10-day production cut,” China Iron & Steel Association (CISA) revealed.
However, demand is expected to remain low in the near term because of adverse weather conditions.
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