This week, steel prices in China showed a downtrend due to slow demand in a few regions amid rains. Also, the recent turmoil in the market with respect to the government tightening measures to check the spurt and speculation in coal prices dampened sentiments, resulting in a crash in metal prices in the futures market.
Iron ore prices, along with semis and finished steel, dropped w-o-w, while coking coal prices moved up slightly due to limited availability.
China’s crude steel output stood at 73.75 million tonnes (mn t) in Sept’21, registering a decline of 21% y-o-y and 11% m-o-m, as per latest data released by China’s National Bureau of Statistics.
1. China spot iron ore prices drop: Chinese spot iron ore fines Fe 62% prices opened at $124.15/t CNF China for the week but decreased to $120.35/t, CNF China towards the weekend.
Seaborne iron ore prices slumped on market uncertainties overpoor finished steel demand and ongoing sintering curbs. Buyers turned cautious, weakening the demand outlook. However, towards the week’s close, prices recovered some lost ground, following a slump the day before, on improved buying of early-December cargoes.
Iron ore inventory at major Chinese ports increased to 140.2 mn t this week as against 139.7 mn t in the week before, as per data maintained by SteelHome.
a) Spot pellet premium up w-o-w: The spot pellet premium for Fe 65% grade pellets was assessed at $72.05/t as against $70.05/t assessed last week. Several Chinese sources are of the view that pellet prices will remain supported on tight pellets supply in China. Sintering restrictions in Tangshan and Wu An would likely keep lump premiums afloat, coupled with limited pellet supply domestically and from the exports markets.
Sources also expected lumps usage to increase as China enters the winter season due to reduced concentrates production as the latter holds higher moisture levels.
Production curbs during the heating season and increased power restrictions in some regions in China such as Henan province, weighed on premiums of medium-grade fines. Hence, concerns over steel demand continue. In addition, it was heard that the weakened finished steel demand, especially for rebars, resulted in a spill-over effect onto the portside, weakening prices there by a large extent. Total pellets inventory at China’s major ports was recorded at 4.3 mn t this week as against 4.4 mn t a week ago.
b) Spot lump premium stable w-o-w: The spot lumps premium remains stable at $0.2200/dmtu as against last week. Lump premiums remained firm on expectations of higher lumps usage due to stricter sintering curbs in the coming weeks. This trend is likely to sustain through the winter.
2. China’s Shagang Steel cuts scrap buy prices by $13/t: China’s Shagang Jiangsu Steel has announced the second cut in scrap procurement prices in Oct’21 this week by RMB 80/t ($13/t) for all grades. After the revision, the price of HMS (6-10 mm) stands at RMB 3,780/t ($591/t), including 13% VAT. Under the pressure of a sharp fall in finished steel prices, most mills have slashed their scrap purchase prices.
3. Coking coal prices up w-o-w: China-delivered seaborne coking coal export prices have been rising steadily, supported by robust demand from end-users amidst limited availability.
In the Chinese market, supply tightness in premium coking coal gave support to rising offer prices while demand stayed steady despite concerns on steel production curbs. The supply tightness was brought on by insufficient domestic and overseas supply, following import restrictions on Australian coals and Covid-related disruptions in Mongolia.
Chinese buyers, including steel mills and traders, continue seeking higher-priced non-Australian premium coking coal, following supply disruptions amid resurgent Covid infections in Mongolia and the unofficial ban on Australian coals. The major coking coal exporting countries, USA and Canada , are mostly supplying to China , at at prices relatively higher. The latest price for the premium HCC Australian grade is assessed at $615.00/t CNF China as against $614/t last week.
4. China’s billet prices decline towards weekend: Steel billet prices in China’s Tangshan witnessed a sharp decline of RMB 260/t ($41/t), w-o-w. Domestic billet prices stood at RMB 4,990/t ($781/t) towards the weekend, inclusive of 13% VAT. According to data maintained with SteelMint, China’s SHFE rebar futures contract for Jan’22 delivery closed on 22 Oct’21, at RMB 4,900/t ($767/t), witnessing a sharp decline of RMB 615/t ($96/t), w-o-w.
5. HRC export offers down $5/t w-o-w: Chinese mills have lowered their HRC export offers by $5/t to $970-990/t FOB China as against $975-995/t FOB in the previous week. The buzz over an export tax on HRCs by the government since mid-May’21, coupled with competitive prices from Indian and Russian mills have dented demand for Chinese-origin cargoes.
A decline in HRC futures along with more production restrictions imposed by the authorities tillmid-Mar’22, at steel-making hubs Hebei and Jiangsu led to a fall in spot HRC prices in China. Current week’s prices in the domestic market stand at RMB 5,550-5,600/t (eastern China), down RMB 210-230/t compared to 5,760-5,830/t (eastern China) a week ago.
6. Domestic rebar prices down w-o-w: Domestic rebar prices moved down w-o-w as market participants slowed their purchases and were expecting a decline in prices amid weak housing industry data. Moreover, some places in northern and eastern China witnessed rains, thus dampening the demand for rebar.
In the current week, prices stands at RMB 5,240-5,270/t (northern China), down RMB 360-380/t compared to RMB 5,600-5,650/t (northern China) last week, inclusive of 17% VAT.
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