The Chinese steel market relayed mixed sentiments this week propelled by stricter norms enforced by the government to curb abnormal steel pricing along with volatility in the futures market. The Shanghai Futures Exchange (SHFE) rebar futures settled with an increase of RMB 116/tonne (t) ($18/t) on a day-on-day (d-o-d) basis at RMB 4,933/t ($775/t) on 28 May ’21.
For the second consecutive week, prices of raw materials as well as finished steel dropped drastically.
Product-wise
1. China spot iron ore prices up: Chinese spot iron ore prices opened at $188.25/t CNF China for the week but decreased to $187.65/t CNF China towards mid-week. Seaborne iron ore prices continued on a free-fall due to the erosion in Chinese steel margins.
The market witnessed further weakness in seaborne iron ore prices as waning steel prices reduced margins along with disparity between bids and offers. Increased interest in lower-grade fines was heard as some mills gave priority to cost-saving rather than maximising output. Interest in high-grade fines decreased and traders expected the spread between the Fe65% and Fe62% indices to narrow with the squeeze in steel margins.
The prices, however, increased to $189.55/t, CNF China towards the weekend as participants looked to secure spot cargoes.
As per data compiled by SteelHome consultancy, iron ore inventory at major Chinese ports were recorded at 128.5 mn t as against at 128.35 mn t assessed a week ago.
- Spot pellet premiums up w-o-w: Spot premiums for Fe 65% grade pellets were assessed at $65.1/t as against $63.8/t last week. There were less seaborne pellet offers in the week with sellers staying on the sidelines, waiting for market clarity as iron ore derivatives fell during the week. Iron ore pellet contracts demand looks set to remain strong as spot iron ore premiums have widened and prices were raised to a record high in May. As per data compiled by SteelHome consultancy, pellet inventory at major Chinese ports were recorded at 3.9 million tonnes (mn t), against 3.8 mn t assessed last week.
- Spot lump premiums stable w-o-w: Spot lump premiums, at $0.5200/dmtu, were stable week-on-week (w-o-w). Lump demand usually decreases due to the onset of the monsoon in the southern part of China. Although lump supply is expected to gradually improve in the coming weeks, sources did not expect lump premiums to drop to very low levels because of the emissions controls in place.
2. Coking coal prices increase sharply: Seaborne coking coal prices significantly increased last week, on the back of higher bids and fresh bookings concluded at elevated levels in the Asian markets, excluding China.
The ex-Chinese Asian spot markets continued to witness firm buying interest with indicative tradable bids placed between $139/t and $143/t for Jul ’21 delivery cargoes.
The latest offers for the Premium HCC grade are assessed at around $153/t FoB Australia, as against $114/t FoB a week ago.
3. Chinese domestic billets down w-o-w: Chinese domestic billet prices settled at RMB 4,800/t ($754/t) on 28 May ’21, down by RMB 350/t ($55/t) on volatile SHFE rebar futures. However, on a d-o-d basis, the prices rose by around RMB 70/t ($24/t) as the futures market rallied.
4. HRC export offers drop sharply: Chinese mills quoted HRCs for exports at around $880-890/t FoB China with major producers’ offerings at around $900-910/t FoB this week against $1,020/t FoB last week. Thus, offers sharply declined by $135/t w-o-w.
Export offers have declined because market participants have adopted a wait-and-watch approach over rumours whether China will impose export tariffs or not.
Meanwhile, in the domestic market, HRC prices dropped by RMB 180-270/t w-o-w to RMB 5,400-5,500/ (Eastern China) in comparison with RMB 5,670-5,680/t (Eastern China) a week ago.
The National Development and Reform Commission (NDRC) held a meeting on Sunday with major companies and associations representing iron, steel and non-ferrous sectors and issued a warning against illegal practices that are driving up steel prices which, in turn, resulted in dull demand.
HRC stockists and sellers cut their prices during the week to encourage higher sales and to meet the cash flow of the month, avoiding further losses.
5. Domestic rebar offers down w-o-w: China’s domestic rebar prices stand at RMB 5,000-5,030/t (Northern China), witnessing a sharp decline of RMB 400-420/t w-o-w as against RMB 5,400-5,450/t (Northern China) last week.
Apart from the NDRC’s probe, a decline in construction activities due to hindered logistics amidst heavy rains and adverse weather conditions in several parts of China weighed on rebar prices too this week.
6. Shagang cuts scrap purchase price to nearly one-month low: China’s largest EAF steelmaker, Shagang Jiangsu Steel, announced a nearly one-month low cut of RMB 50/t ($8) in its scrap purchase price on 26 May ’21. After the latest revision, the price for HMS 6-10 m stands at RMB 3,590/t ($568), inclusive of 13% VAT, delivered to headquarters.
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