The Chinese market witnessed a positive trend this week over talks of easing production curbs by local authorities along with the gradual pick-up in the domestic demand followed by strong futures gain. Prices of raw materials as well as finished steel surged during the week.
Product-wise market sentiments:
1. China spot iron ore prices up: Chinese spot iron ore prices opened at $198.75/t CNF China for the week and increased to $211.20/t, CNF China towards mid-week. The prices increased on higher spot transactions for mainstream medium grade fines. Steel and iron ore prices rose over the first half of May but fell in the final week of the month in response to the China government’s efforts to curb rising commodity prices.
The prices dropped to $208.35/t towards the weekend as trading sentiment was affected by sluggishness in the steel market.
The market witnessed further weakness in seaborne iron ore prices as waning steel prices reduced margins. Offered levels were heard higher than buyers’ willingness to pay. Increased interest in lower-grade fines was heard as some mills gave priority to saving costs rather than maximising output.
As per data compiled by SteelHome consultancy, iron ore inventory at major Chinese ports were recorded at 127.65 mn t as against 128. 5 mn t assessed a week ago.
- Spot pellet premium down w-o-w: Spot pellet premium for Fe 65% grade pellets were assessed at $64.05/t as against $65.1/t last week. Extended Covid-19 precautionary measures at Chinese ports weighed on seaborne pellet prices. Market participants were increasingly concerned over extended waiting period for port clearances of Indian pellet and fines cargoes. and higher associated costs raising demurrage charges.
As per data compiled by SteelHome consultancy, pellet inventories at major Chinese ports were recorded at 3.9 mn t, against 3.65 mn t assessed last week. - Spot lump premium up w-o-w: Spot lump premiums were at $0.5600/dmtu as against $0.5200/dmtu last week.
Seaborne lump premiums gained support as sources saw limited supply of mainstream lumps as secondary prices remained firm. However, sources expected decreased demand as the rainy season draws closer.
2. Coking coal offers up w-o-w: Seaborne coking coal prices have continued to surge this week, on strong demand in the ex-Chinese Asian markets amidst supply concerns for cargoes to be delivered in July-Aug ’21.
However, market sources are expecting that buyers may retreat, as prices are moving up fast. Moreover, Indian buyers are not in a hurry to procure cargoes, as they are stocked up for Jun-Jul ’21.
The latest offers for the Premium HCC grade are assessed at around $167/t FoB Australia, up by $14/t as against $153/t FoB basis.
3. Chinese domestic billet prices rise w-o-w: Chinese domestic billet prices settled at RMB 5,000/t ($782/t), ex-Tangshan, including 13% VAT, on 04 June ’21, up by RMB 200/t ($31/t) on a w-o-w basis amid the up-trend in in SHFE rebar futures.
4. HRC export offers up w-o-w- Chinese mills raised HRC export offers to $960-970/t FoB China, up $70-80/t as against $880-900/t FoB basis in the preceding week. The market started to gain upward momentum mid-week due to a rebound in futures markets.
However, market participants were awaiting clarity on whether the Chinese government will impose export tariffs or not. Volatility in the domestic market kept buyers overseas cautious.
In the domestic market, HRC prices moved up significantly by RMB 130-180/t w-o-w over active trading supported by future gains. Meanwhile, buyers adopted a wait-and-watch mode over uncertainty on production curbs in the Tangshan region of China.
The current week’s prices stand at RMB 5,580-5,630/t (Eastern China) compared to RMB 5,400-5,500/t (Eastern China) a week ago.
5. Domestic rebar offers rise w-o-w: Domestically, rebar manufacturers upped prices by RMB 160-170/t to RMB 5,160-5,200/t (Northern China) as against RMB 5,000-5,030/t (Northern China) a week ago.
Factors driving the prices
- A proposal for steel mills’ emission cuts to 20-30% from the current 30-50% was proposed by local authorities, which has not been approved by the officials yet.
- Adverse weather (rains) in several parts of China hindered transportation of rebar and construction activities.
- Costlier raw materials such as iron ore and coke also pushed up rebar prices.
- Uptick in futures market.
Leave a Reply