- SHFE steel futures continue to decline
- China’s steel exports rise over 7% in July
Chinese steel prices continued their downward trajectory this week. Prices of key products like hot-rolled coil and rebar declined, mirroring the slump in Shanghai Futures Exchange contracts. Weakening demand was also reflected in lower prices of raw materials such as billets, coal, and iron ore.
The average daily crude steel output of CISA-affiliated mills stood at 1.973 mnt in late-July 2024, a decrease of 8.14% against 2.148 mnt in mid-July. The CISA has reported total steel inventory of key enterprises in late-July 2024 at 16.050 million tonnes (mnt), down 251,600 t or 1.54% compared to 16.302 mnt in mid-July.
Chinese steel exports increased 7.1% y-o-y to 7.82 mnt in July 2024 against 7.31 mnt in July 2023, as per General Administration of Customs. However, m-o-m, exports declined 11% compared to 8.75 mnt.
1.Iron ore spot prices fall by $3/t w-o-w: The benchmark iron ore fines price decreased w-o-w by $3/t to $99/ t CFR China on 8 August. This decline was driven by bearish physical demand and supply fundamentals, overshadowing the previous day’s economic gains. The focus remained on discounted lower-grade products among end-users due to thin steel mill margins. Despite ongoing production cuts, steel mill margins continued to drop, leading to insufficient procurement activity. Port inventories declined recently due to seasonal shipping factors, but are expected to increase as shipping volumes rebound
Iron ore inventory at major Chinese ports fell by 1.3 mnt to 150.4 mnt on 8 August compared to last week according to SteelHome data.
a) Spot pellet premium inches up: Spot pellet premium for Fe 65% grade pellets edged up by $0.30/t at $16.60/t CFR China on 7 August.
b) Spot lump premium increases: Spot lump premium increased by $0.0015/dmtu at $0.1700/dmtu on 8 August.
2.Coking coal prices drop w-o-w: Coking coal prices dropped $2/t w-o-w to $214.5/t FOB. This was due to ample material availability and muted trading activities.
3. Chinese billet prices fall on bearish sentiments: Billet prices in Tangshan fell by RMB 70/t ($10/t) w-o-w to RMB 3,070/t ($428/t) on 9 August. Seasonal factors, volatility in raw material, finished steel prices, and rebar futures along with lower trades this week weighed on billet prices. Prices include 13% VAT. SHFE rebar futures (October, 2024 delivery) declined by RMB 102/t ($14/t) w-o-w to RMB 3,277/t ($457/t) on 9 August.
4.Domestic HRC offers decline w-o-w: Chinese HRC offers declined by RMB 70/t ($10/t) w-o-w to RMB 3,390/t ($473/t) against RMB 3,460/t ($482/t) a week ago, following fall in SHFE HRC futures (October contract) prices. SHFE HRC futures decreased by RMB 55/t ($8/t) w-o-w to RMB 3,446/t ($481/t) against RMB 3,501/t ($488/t) last week.
Chinese HRC export offers remained stable w-o-w at $495/t, despite a consistent decline in domestic spot and futures steel prices, Chinese steelmakers have maintained relatively stable export offers for HRC. However, this stability has coincided with a downward trend in Chinese HRC export offers, which has notably reduced overseas buyer interest.
World’s top steel manufacturer, Baosteel, has decreased HRC prices by RMB 100/t ($14/t) m-o-m for Sep’24 sales, following a similar reduction for Aug. The steel major has lowered HRC offers on subdued domestic demand and a steep drop in global steel prices. In addition, prices for hot-dip galvanised and electro-galvanised have also been reduced by RMB 100/t ($14/t).
5. Domestic rebar offers inch down w-o-w: China’s domestic rebar offers inched down by RMB 20/t ($3/t) w-o-w to RMB 3,310/t ($462/t) as of RMB 3,330/t ($464/t) previous week. SHFE rebar futures (October contract) dropped by RMB 67/t ($9/t) w-o-w to RMB 3,286/t ($458/t) as compared to RMB 3,353/t ($468/t) a week ago.
China’s domestic rebar prices continued to dropped, driven by a surge in inventory due to the recent introduction of revised-standard rebar to the market. Sluggish rebar demand during the summer, coupled with the availability of low-cost billet, has intensified pressure on steel mills to reduce selling prices.
Outlook
The Chinese steel market is currently facing significant challenges due to weak demand and oversupply, leading to a bearish market sentiment. A sustained recovery in the steel sector hinges on a revival of the real estate industry and effective government intervention. Until there is substantial improvement in these areas, the market is expected to remain subdued.
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