This week, Chinese steel prices gained strength from the rally in the futures market, as authorities implemented anti-smog measures since the beginning of the week. Also, a rollover in flat steel prices for Feb’22 announced by China’s leading steel producer, Baosteel, kept the market sentiments buoyed.
1. China spot iron ore prices rise: Chinese spot iron ore fines Fe62% prices opened at $119.50/t CNF China for the week and were assessed at $127.30/t, CNF China towards the weekend. Seaborne iron ore prices rose on firm buying interest and limited spot availability, alongside fresh transactions and observed price points.
The premium of mainstream medium-grade fines improved across the board, as buying interest was resilient, with portside import loss of medium-grade fines shrinking, according to sources.
Production levels of finished steel products were quite low in December, as well as finished steel stock levels. Hence, even if the macro view of steel production is bearish in 2022, steel demand and steel mill margins in the beginning of the year are likely to see improvements and lift iron ore prices. Iron ore inventory at major Chinese ports stood at 156 mn t this week, inching down by 0.2 mn t as against 156.2 mn t a week ago, as per data maintained by SteelHome.
a) Spot pellet premium inches up w-o-w: Spot pellet premium for Fe65% grade pellets was assessed at $48/t, moving down as against $56.15/t last week. Seaborne pellet premiums for 65% Fe weakened in the week due to the larger increase in the underlying 62% Fe fines compared to the fixed prices for seaborne Indian pellets.
b) Spot lump premium stable w-o-w: Spot lump premium was seen at $0.2765/dmtu, against $0.2030/dmtu last week. The demand could continue to get support from winter sintering curbs and higher blast furnace utilization rates in China in January, market sources said.
2. Coking coal prices up $2/t w-o-w: Seaborne coking coal FOB prices rose by $2/t w-o-w basis amid tight supply. Weather-related concerns in Australia continue to weigh on market sentiments and offers in the spot market are limited.
Enquiries were heard from India for premium hard coking coal (HCC), but no deal was reported to have been concluded. The latest price for the premium HCC grade is assessed at around $359/tonne (t) FOB Australia, up by $2/t as against $357/t FOB a week ago.
3. Shagang Steel raises scrap purchase price by $16/t: China’s leading electric arc furnace (EAF) steelmaker, Jiangsu Shagang Group, raised its scrap purchase prices by RMB 100/tonne (t) ($16/t) on 7 Jan’22. Notably, this is the first hike in Jan’22. Current prices of HMS (6-10 mm) stand at RMB 3,690/t ($579/t), including 13% VAT, delivered to headquarters. With this, the company’s scrap purchase bids have hit over two-months high. The similar levels were last seen in end-Oct’21.
4. China billet prices rise towards the weekend: Steel billet prices in China’s Tangshan witnessed a rise of RMB 80/t ($12/t) w-o-w. Domestic billet prices stood at RMB 4,350/t ($682/t), inclusive of 13% VAT, on 7 Jan’22. According to data maintained with SteelMint, the Chinese rebar futures contract for May’22 delivery closed at RMB 4,526/t ($710/t) on 8 Jan’22, a sharp rise of RMB 211/t ($33/t) on the week and a rise of RMB 32/t ($5/t), d-o-d.
5. HRC export offers unchanged w-o-w: Chinese mills have kept their HRC export offers unchanged at $760-770/t FOB China on the week due to limited activities post the Christmas and New Year holidays. Moreover, export offers from China are less attractive than other exporting nations, therefore, buying interest for Chinese-origin cargoes remained low.
For instance, China’s HRC export to Vietnam were heard to be around $795/t while those from India were at $750/t, CFR basis, as assessed on 4 Jan’22.
In the domestic market, HRC prices rose by RMB 30-60/t ($5-10/t) to RMB 4,900-4,930/t ($768-773) eastern China compared to RMB 4,840-4,900/t ($759-768/t) eastern China a week ago. This came on the back of sharp gains in HRC futures as the coal prices spiked after Indonesia’s unexpected move on banning coal exports in Jan’22 amid the domestic power supply crisis.
Another factor was the implementation of ‘second level’ severe anti-smog measures in Tangshan and Hebei provinces this week to combat heavy air pollution.
6. Domestic rebar prices flat w-o-w: Domestic rebar prices remained flat (w-o-w) at RMB 4,500-4,550/t ($706-713/t) (Northern China) on limited activities due to adverse weather conditions in some regions.
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