The Chinese steel market witnessed an increase in prices of most products ahead of the Golden Week holidays (1-7 Oct’21). The increasing impact of the production curbs arising out of environmental concerns along with power curtailments has lent support to domestic market prices. However domestic billet prices and HRC export offers have seen a correction this week.
1. China spot iron ore prices stable w-o-w: Chinese spot iron ore fines Fe 62% prices opened at $118.65/t CNF China for the week and decreased to $112.35/t, CNF China towards mid-week. By the weekend, prices rebounded to $118.25/t.
Traders continued to show interest in procuring cargoes which led to a rise in spot iron ore prices. Although some traders appeared to be more confident on the near-term price outlook, uncertainties around production curbs after the Golden Week holidays in October kept end-users away from the seaborne market.
Also, even though a few mills might have restocking needs for October, they are not preferring to buy at current levels and waiting for the holidays to get over, as they expect that prices could inch down further.
Firm buying interest was witnessed for November loading cargoes compared to October due to the upcoming holidays. However, the curbs on crude steel production, coupled with disruptions caused by power usage controls at several provinces in China, paint a rather dismal outlook for raw material demand.
Iron ore inventory at major Chinese ports increased to 133.5 million tonnes (mn t) this week as against 130 mn t in the preceding week, as per data maintained by SteelHome.
a.) Spot pellet premiums up over tight supplies: Spot pellet premiums for Fe 65% grade pellets were assessed at $61.3/t as against $58/t assessed last week. Several Chinese sources see support for pellet prices on tight domestic supply. The power cuts have reduced output from Chinese pellet plants, negatively impacting domestic production.
b.) Spot lump premiums rise w-o-w: Spot lump premiums were recorded at $0.1300/dmtu, up as against $0.0250/dmtu assessed last week. High pellet prices and possibly some talks on softening domestic coke prices in the near term drove up demand for lumps at Chinese ports. Mills found cost efficiency in lumps at current premiums as pellet prices were relatively more expensive.
2. Coking coal prices decline on low buying interest: Seaborne coking coal prices have decreased by over 5% this week, as lower-priced offers failed to entice buyers in the ex-China Asian markets.
In the Chinese market, however, supply tightness of both domestic and imported coking coals, coupled with strong steel prices, continued to provide support to sky-high prices of seaborne coking coal, without any signs of them easing in the near term.
Indian steelmaking and thus the imports of coking coal are expected to rebound, rising slowly in the final quarter of 2021 and more rapidly from early 2022, as per Australia’s Department of Industry, Innovation and Science.
Consequently, Australian coking coal prices are forecasted to increase on improving demand in major consuming countries, especially India.
The latest prices for the premium HCC grade are assessed at around $388.50/t FOB Australia, $603.75/t CNF China and $418.50/t CNF India.
3. Domestic billet prices fall towards weekend: Steel billet prices in China’s Tangshan fell on a weekly basis by RMB 20/t ($3/t) to RMB 5,210/t ($806/t), inclusive of 13% VAT on 30 Sept’21. According to data maintained with SteelMint, the Chinese rebar futures contract for Jan’22 delivery closed yesterday at RMB 5,706/t ($883/t), with a w-o-w increase of RMB 101/t ($16/t).
4. HRC export offers come down by $10/t w-o-w: The export offers from Chinese mills saw a marginal correction this week, dropping to $970-990/t FOB basis as against $970-1,000/t FOB a week back. Competitive offers from other exporting countries and slowed demand from the Vietnamese importers after the procurements made from Russia in the previous week kept demand for HRCs low.
Domestic market prices increased by RMB 50-60/t w-o-w to RMB 5,700-5,740/t (Eastern China) compared with RMB 5,480-5,520/t (Eastern China) a week back.
5. Domestic rebar prices up significantly by RMB 220/t w-o-w: Domestic rebar prices steeply increased by RMB 220/t to RMB 5,700-5,740/t (Northern China) contrasted against RMB 5,480-5,520/t (Northern China) a week ago. Meanwhile, demand from the construction segment remained stable this week.
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