- SHFE futures show an upward trend
- Steel inventories at CISA mills decline for early-April
- Chinese HRC export offers remain stable
China’s steel market is on the rise. Steel prices are rising, driven by both increased demand and higher production costs. Steel mills are seizing the opportunity to boost profits by increasing production, which in turn raises the demand for raw materials like iron ore and coking coal. Moreover, prices of key products rebar and HRC are showing an upward trend.
The China Iron and Steel Association (CISA) reported total steel inventory of key enterprises in early-April 2024 stood at 18.253 million tonnes (mnt), a decline of 173,600 tonnes (t) or 0.94% compared to 18.427 mnt in late-March. Moreover, inventory went down by 1.2702 mnt or 6.51% m-o-m compared with 19.523 mnt in early-March.
The average daily crude steel output of CISA-affiliated mills stood at 2.111 mnt in early-April, edged down by 0.47% from 2.121 mnt in late-March. Whereas, output rose by 2.6% m-o-m against 2.058 mnt in late-March.
1. Iron ore spot prices rise by $6/t w-o-w: The benchmark iron ore fines prices increased w-o-w by $6/t to $118/t CFR China on 19 April, 2024 due to positive economic news about steel production coupled with increased iron ore demand. Prices are being supported by the resumption of steel production and restocking activity for May delivery cargoes. China is accelerating the issuance of special bonds worth $138 billion for construction projects to boost domestic steel consumption. Anticipation builds as China’s quarterly report is awaited, with potential implications for commodity prices upon its releases. However, Middle East tensions may affect the Asian iron ore market, leading to a cautious outlook on future developments.
Iron ore inventory at major Chinese ports was down by 0.5 mnt to 143.1 mnt on 18 April compared to last week according to SteelHome data.
a) Spot pellet premium up w-o-w: Spot pellet premium for Fe 65% grade pellets inched up by $ 0.3/t w-o-w to $11.85/t on 17 April.
b) Spot lump premium up w-o-w: Spot lump premium rose by 0.0065 to $0.0595/dmtu on 19 April, 2024.
2. Coking coal prices remain flat w-o-w: Coking coal prices rose by 13% w-o-w to $254/t FOB on 20 April, 2024 amid deals concluded at higher levels.
3. China’s billet prices rise by RMB 80/t ($11/t) w-o-w: Chinese billet prices rose w-o-w by RMB 80/t ($11/t) to RMB 3,490/t ($492/t) on 19 April. Increase in raw material, finished steel prices, rebar futures along with better steel margins have kept billet prices supported. Meanwhile, Chinese SHFE rebar futures increased w-o-w by RMB 47/t ($7/t) to RMB 3,675/t ($518/t) on 19 April.
4.HRC prices increase w-o-w: Chinese HRC prices in China rose by RMB 50/t ($7/t) w-o-w to RMB 3,830/t ($529/t) against RMB 3,780/t ($522/t) a week ago, following the rise in SHFE futures. SHFE futures (May contract) increased by RMB 74/t ($10/t) w-o-w to RMB 3,842/t ($531/t) on 19 April as compared to RMB 3,768/t ($520/t) last week. However, Chinese HRC export offers remained stable at $535/t for the week.
5.Rebar prices rise w-o-w: Chinese rebar prices increased by RMB 160/t ($22/t) w-o-w to RMB 3,810/t ($526/t) against RMB 3,650/t ($504/t) previous week. China’s infrastructure projects are driving the surge in rebar demand. In addition, SHFE futures (May contract) went up by RMB 71/t ($10/t) w-o-w to RMB 3,678/t ($508/t) on 19 April as compared to RMB 3,617 ($500/t) on 12 April.
Outlook: Chinese steel prices are increasing, driven by reducing stockpiles and an improving economic outlook. However, geopolitical instability in the Middle East raised concerns about potential cost hike for raw materials. Chinese steel exports are also expected to hold steady, driven by rising raw material prices and a strengthening global economy.