Finished steel prices in China continued to decline amidst subdued demand for raw materials like coke and coal. However, towards the weekend, iron ore prices moved up marginally on improved property market outlook but demand continues to remain sluggish.
China’s crude steel output fell for the fifth consecutive month to 71.58 million tonnes (mn t) in Oct’21, showing effectiveness of the governments’ drive to control production and improve environmental conditions.
Product-wise sentiments
1. Chinese spot iron ore prices rebound towards weekend: Chinese spot iron ore fines Fe 62% prices opened at $89.15/t CNF China for the week and increased to $91.3/t, CNF China towards the weekend.
Seaborne iron ore prices fell slightly on 15 Nov’21 on continued low liquidity and pessimistic market outlook. The ongoing winter steel production curbs and sintering restrictions continued to weigh on iron ore demand. However, prices rebounded slightly by the end of the week on improved property market outlook, but seaborne buying interest remained subdued. Iron ore inventory at major Chinese ports increased to 150.2 mn t this week as against 147.6 mn t in the previous week , as per data maintained by SteelHome.
a) Spot pellet premiums inch down w-o-w: Spot pellet premiums for Fe 65% grade pellets were at $65.45/t as against $66.2/t assessed last week. Several Chinese sources were of the view that demand for direct feeds like lumps and pellets continued to remain poor amid thinning mills’ marginsBuying activity increased at both northern and eastern Chinese ports. However, price gain at the northern ports wasweaker than the eastern ports as sources still held a bearish view on the market due to production controls.
Some steel mills were also heard to be selling their sinters due to the reduced usage at their own blast furnaces. Total pellet inventory at China’s major ports remains stable at 4.3 mn t as against last week.
b) Spot lump premiums down w-o-w: Spot lump premiums were recorded at $0.1080/dmtu this week as against $0.1190/dmtu last week. Lump premiums continued to trend down, as market participants expected demand to remain sluggish till early-CY’22, although some sources pointed out that the room for further decline might be limited.
2. Coking coal prices down $35/t: Seaborne coking coal (HCC) prices underwent a downward correction of almost 9% this week. Trading activities in Asian markets, excluding China, remained muted in the absence of firm buying interest.
The sharp fall in seaborne coking coal demand ensued from increased coal production as well as the softening of steel and coke demand in China, the world’s top coal consumer.
Indian buyers are reportedly hesitant about booking deals. Bids for Goonyella branded Australian premium mid-volatile coking coal were assessed at $360/t FOB. The latest price for the premium HCC grade is assessed at around $364/tonne (t) FOB Australia down $35/t as against $399/t FOB a week ago.
3. China’s billet prices fall towards weekend: Steel billet prices in China’s Tangshan witnessed a drop of RMB 90/t ($14/t), w-o-w. Domestic billet prices stood at RMB 4,200/t ($657/t), inclusive of 13% VAT. According to data maintained with SteelMint, China’s SHFE rebar futures contract for Jan’22 delivery closed on 19 Nov’21 at RMB 4,285/t ($671), an increase of RMB 36/t ($6/t) on a weekly basis.
4. HRC export offers down $30/t w-o-w: Chinese mills are quoting HRCs for exports at $780-790/t FOB China, down $30/t as against $810-820/t FOB a week ago. Buyers in both domestic and overseas markets adopted a wait-and-watch approach on unclear price direction owing to the fall in futures market prices.
According to data maintained with SteelMint, SHFE HRC futures contract for Jan’22 closed on 19 Nov’21 at RMB 4,366/t, down RMB 263/t w-o-w.
A drop in key steelmaking raw materials such as coke and coal resulted in a decline in HRC prices in the domestic market. Apart from this, in a bid to improve the air quality cities like Tangshan, Handan in Hebei province and others, have implemented level-two anti-smog alerts leading to stricter production cuts for the mills with high emissions in the region.
This week, HRC prices took a steep fall of around RMB 130/t to RMB 4,630-4,680/t (eastern China) compared with RMB 4,760-4,810/t (eastern China) a week ago.
5. Domestic rebar prices down by RMB 120/t: Rebar producers have lowered their prices in the domestic market by RMB 80-120/t to RMB 4,440-4,480/t (northern China) in comparison with RMB 4,520-4,600/t (northern China) in the previous week. The downtrend in data released by the National Bureau of Statistics (NBS) on newly constructed housing at 1.67 billion square metres (down 7.7% y-o-y) and a monthly decline in prices of houses in Oct’21 turned the sentiments bearish.
6. Shagang Steel lowers scrap purchase price by $13/t: China’s Shagang Jiangsu Steel announced the second reduction in scrap procurement prices this week, by RMB 80/t ($13/t) for all grades from 19 Nov’21.
- After the revision, the price of HMS (6-10mm) stands at RMB 3,240/t ($507/t), including 13% VAT, delivered to headquarters.
- Bearish steel market sentiments and piling up of inventories at mills have led to the cutback in scrap buy prices.
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