This week, the Chinese steel market exhibited bullish sentiments on account of buoyant domestic demand and strong futures. However, towards the end of the week, futures dropped sharply. Iron ore prices touched an all-time high but reported a drop towards the weekend.
Meanwhile, domestic billets prices dropped on volatile futures. However, rebar and HRC prices continued to remain strong.
Product-wise market sentiments:
1. China’s spot iron ore prices drop during the week: Chinese spot iron ore prices opened at $229.55/tonne (t) CNF China for the week but increased to $ 233.10/t, CNF China. Global iron ore fines prices picked up to their highest level since CY’09 as per data maintained with SteelMint. Robust steel demand and tightened supply, due to regional production curbs in China, lifted steel prices, lending support to seaborne and portside iron ore demand. Having drawn down their iron ore stocks during the holidays, mills were actively procuring from the ports in small quantities.
However, the prices dropped sharply towards the end of the week to $209.35/t, CNF China. This retreat dragged down prices of steel-making raw materials like iron ore.
As per data compiled by SteelHome consultancy, iron ore inventory at major Chinese ports were recorded at 128.3 million tonnes (mn t) as against 131.05 mn t assessed a week ago.
- Spot pellet premium down w-o-w: Spot pellet premium for Fe 65% grade pellets were assessed at $58.55/t as against $62.4/t last week. There was some interest from Chinese buyers amid expectations of further environmental control measures to support direct feed demand before the holidays.
However, risks related to potential Covid-19 precautionary measures on pellet cargoes may weaken speculative demand. As per data compiled by SteelHome consultancy, pellet inventory at major Chinese ports was recorded at 3.8 mn t, down against 3.9 mn t last week.
- Spot lump premiums down w-o-w: Spot lump premiums were at $0.5235/dmtu as against $ 0.5500/dmtu assessed last week.
Lump premiums continued to face headwinds. Market sources saw further weakness in lump premiums heading into June, as demand usually decreases due to the onset of the monsoon season in the southern part of China. Supply of the mainstream Australian lump remained low. Some mills were heard still maintaining their usage of lumps, while other market sources indicated that current price levels were not competitive.
Meanwhile, handling of lumps becomes an issue during the upcoming monsoon season in the southern and eastern regions.
2. Coking coal offers move up w-o-w: Seaborne coking coal prices increased slightly this week with more bookings concluded in the premium low-volatile segment for June deliveries.
The latest offers for the Premium HCC grade are assessed at around $114/t FoB Australia, up by $5/t as against $109/t FoB basis a week ago.
3. Chinese domestic billet prices up w-o-w: Chinese domestic billet prices rose by RMB 450/t ($70/t) w-o-w. However, in last two days, amid a drop in SHFE rebar futures by RMB 274/t ($43/t), day-on-day (d-o-d), prices on 14 May ’21 witnessed a significant fall of RMB 150/t ($23/t), d-o-d. The prices of commonly traded Q235 billets of 150mm diameter were reported at RMB 5,670/t ($881/t) ex Tangshan, including 13% VAT.
4. HRC export offers rise w-o-w: HRC export offer during the week stood at around $1,050-1,060/t FoB China, up by $90/t w-o-w against $960-970/t FoB basis a week ago.
Meanwhile, major mills are offering at around $1,100/t FoB basis, which is on the higher side. Prices surged significantly on the recent announcement of withdrawal of the export rebate tax in HRC prices.
In the domestic market, HRCs were being offered at around RMB 6,160-6,450/t (Eastern China) touching their historical highs, up by RMB 170-450/t w-o-w compared to RMB 5,990-6,000/t (Eastern China) a week ago.
- To control carbon emissions, the Chinese government has announced production cuts, which, in turn, offer headroom to mills to increase steel prices.
- The rise is also supported by strong gains in the HRC futures market, followed by fears that prices might increase further.
At the beginning of the week, China’s leading steel producer, Baosteel, raised its HRC list price by around RMB 300/t for June deliveries.
5. Domestic rebar offers touch historic highs w-o-w: In the domestic market, rebar producers steeply raised their offers by RMB 630-640/t w-o-w over healthy demand from the construction sector and increasing prices of raw materials (i.e billets) supported by strong rebar futures. The current offers stand at around RMB 6,150-6,180/t (Northern China) as against RMB 5,520-5,540/t (Northern China) a week ago.
6. Shagang lifts bids for scrap purchase: Shagang Steel lifted its scrap procurement prices by a total RMB 470/t ($73/t) this week for all grades. Currently, prices for HMS (6-10 mm) stood at RMB 4,190/t ($651/t), inclusive of 13% VAT, delivered to headquarters. Increase in billet prices and hike in imported scrap offers, resulted in the price hike.
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