This week, Chinese semi-finished prices witnessed an uptrend over strong recovery in demand whereas prices for finished steel products went down despite an anticipation of a decline in production in the coming months.
Weak demand amid buyers waiting for clarity on the export tax, and a seasonal lull continued to weigh on finished steel prices.
Product-wise sentiments
1. Spot iron ore prices up for the week: Chinese spot iron ore fines Fe 62% prices opened at $136.5/t CNF China for the week and increased to $159.05/t, CNF China towards weekend. Iron ore pricing sentiment recovered amid climbing port stock prices and the belief that prices may have hit a near-term low. In order to cut steel production, some major state-owned mills are expected to launch maintenance on blast furnaces which will pull down output for the month of September. Since July, China has been asking steel mills to curtail production in such a way that their output during 2021 is not higher than 2020 levels. The output cuts were initiated to cap iron ore prices and reduce carbon emissions.
As per data compiled by SteelHome consultancy, iron ore inventory at major Chinese ports was recorded at 129.4 mn t as against at 128.8 mn t assessed a week ago.
a) Spot pellet premium down around $8/t w-o-w: Spot premium for Fe 65% grade pellets was assessed at $38.55/t as against $46.4/t last week. Chinese steel mills are shifting away from high-grade iron ore and increasing their tolerance of impurities. Mills were heard to have excess of lump stocks and therefore not procuring pellet cargoes for a while. However, the high coke prices are expected to push pellet demand up as it requires less consumption than lumps.
The weaker scrap prices and expectations of falling steel prices left the pellet premiums weaker as well. As per data compiled by SteelHome consultancy, pellet inventory at major Chinese ports were recorded at 4 mn t, as against 3.8 mn t assessed last week.
b) Spot lump premium down w-o-w: Spot lump premium was at $0.0915/dmtu as against $0.2000/dmtu last week. Seaborne lump demand continued to be under pressure due to a lack of demand. Sources did not see winter cuts this year to benefit lumps as much as in the previous years due to the expected strict production curbs in Q4.
2. Coking coal offers up w-o-w: Australian coking coal prices have steadily increased throughout the week, backed by strong buying interest in ex-China markets and limited spot availability, alongside fresh bookings concluded at higher levels. Australian premium grades of coking coals are still competitively priced relative to US and Canadian materials, despite prices having been boosted by strong buying interest from Chinese buyers.
In the Chinese market, supply tightness of premium coking coal – caused by insufficient domestic supply and limited overseas supply, following import restrictions on Australian coals and Covid-related disruptions affecting Mongolian supplies – gave support to rising offer prices.
The latest price for the premium HCC grade is assessed at around $248/tonne (t) FoB Australia, up $19/t as against $229/t FoB a week ago.
3. Domestic billet prices rise RMB 70/t w-o-w: Steel billet prices in China’s Tangshan rose by RMB 70/t ($11/t) w-o-w. Domestic billet prices stood at RMB 4,950/t ($764/t), inclusive of 13% VAT. According to data maintained with SteelMint, the Chinese rebar futures contract for Jan’22 delivery closed at RMB 5,222/t ($806/t) on 27 Aug’21, witnessing a significant increase of RMB 122/t ($19/t) w-o-w.
4. HRC export offers fall up to $30/t w-o-w: Chinese mills are offering HRCs for export at around $970-1,000/t FoB China, lower by $20-30/t compared with $1,000-1,020/t FoB China in the previous week. Market participants are holding back because of an unclear status regarding an export tax imposition. Also, the traditional import markets of South East Asia and others are under lockdowns due to surge in Covid, thus, impacting the demand for Chinese HRCs.
In the domestic market, HRC prices remained range-bound at RMB 5,600-5,680/t (eastern China) in comparison with RMB 5,620-5,670 (eastern China) a week ago. Demand in the domestic market remained sluggish through the week owing to the seasonal lull.
5. Domestic rebar prices unchanged w-o-w: Prices in the domestic market this week stood at RMB 5,010-5,050/t (northern China), unchanged against last week.
Sellers had to cut their prices towards the weekend to boost sales as trade activities slowed down because of high price levels. However, at the beginning of the week, prices had started to uptrend with a pick-up in end-user demand over clearer weather and moderate temperature in larger parts of China.
6. Shagang Steel slashes long steel price by RMB 150/t ($23/t): Chinese steelmaker Jiangsu Shagang Group has revised down its long steel product prices by RMB 150/t, effective from 21 Aug’21. All prices are ex-mill, including taxes. Decline in steel futures and domestic steel prices have resulted in lowering of offers.
- Re-bar (16-25mm): RMB 5,350/t ($824)
- Wire rod (6.5mm): RMB 5,710/t ($880)
- Coiled rebar (8-10mm): RMB 5,700/t ($878)
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