Chinese steel prices saw an increase in the domestic market this week following hike in export offers amidst market buzz on the export tax which has not been announced so far yet. Also on 29 Jul’21, the Ministry of Finance and State Taxation Administration jointly announced a cancellation of 13% export rebate on 23 types of steel products with effect from 1 Aug’21. This move, in turn, resulted in a steep hike in steel prices.
Product-wise sentiments
1. China spot iron ore prices at 2.5-month low: Chinese spot iron ore prices opened at $202.95/tonne (t) CNF China for the week and decreased to 180.5/t, CNF China towards the weekend. Seaborne iron ore fines prices dropped as premiums slid for medium-grade fines. Prices fell as demand for iron ore from Chinese mills plummeted with the implementation of steel production controls for the second half of the year.
High iron ore prices supported by high steel prices dwindled as end-users were no longer chasing productivity. With production cuts, overall demand for iron ore has weakened as pig iron production is expected to fall while mills were heard favouring discounted medium grade fines and low-grade fines. As per data compiled by SteelHome consultancy, iron ore inventory at major Chinese ports was recorded at 128.25 million tonnes (mn t) as against at 129.5 mn t assessed a week ago.
a) Spot pellet premiums down w-o-w: Spot pellet premiums for Fe 65% grade pellets were assessed at $51.35/t as against $61.85/t assessed last week. The iron ore pellet market continued to fall on subdued demand. Seaborne pellet premiums edged lower on week, with higher spot supply from Indian producers, while demand from China was quiet.
As per data compiled by SteelHome consultancy, pellet inventory at major Chinese ports was recorded at 3.9 mn t, as against 4 mn t assessed last week.
b) Spot lump premiums down w-o-w: Spot lump premiums were at $0.4350/dmtu as against $0.5150/dmtu last week. Sources saw weak interest for lumps as demand from end-users waned. Lump premiums continued to look for a bottom as demand remained depressed. Portside lump stocks were heard to have risen further from 18.9 mn t to 19.2 mn t, as per data compiled by SteelHome consultancy.
2. Coking coal offers up w-o-w: The FoB price of seaborne coking coal increased w-o-w, as spot trading activities resumed with the conclusion of European steelmaker ArcelorMittal’s tender earlier this week.
The deal was concluded at $205/t FoB, for 80,000 t of Australian premium mid-volatile Peak Downs North, with end-Aug’21 laycan. Besides, Australian coal miner Stanmore Resources has acquired a mining lease to develop its Isaac Downs project in Queensland. Meanwhile, tradable resources of seaborne coking coal are still presently limited, without active offers for PLV HCC, according to market sources. The latest price for the premium HCC grade is assessed at around $215.50/t FoB Australia as against $215.50/t FoB a week ago.
3. Chinese domestic billet prices rise w-o-w: According to data maintained with SteelMint, the Shanghai Futures Exchange (SHFE) rebar futures Oct’21 contracts on 30 Jul’21 closed at RMB 5,737/t ($888/t), up w-o-w RMB 66/t ($10/t). Tracking hike in futures, domestic steel billet prices in China’s Tangshan region rose to RMB 5,270/t ($816/t), inclusive of 13% VAT on 30 Jul’21. On a weekly basis, Chinese domestic billet prices recorded a sharp hike of RMB 70/t ($11/t).
4. HRC exports rise by up to $50/t w-o-w: HRC export offers moved up by $10-50/t to $950-1,000/t FoB China as against $940-950/t FoB a week ago. Higher offers along with fear of a possible export tax policy change reappearing every month, pushed buyers to remain on the side-lines. Furthermore, tier-I mills were offering at higher levels of $1,020-1,030/t FoB which increased to around $1,040/t FoB by the end of the week.
In the domestic market, HRC prices scaled up by RMB 100-140/t as demand picked up on improved weather conditions. Also, the futures market remained supportive. The current week’s prices stand at RMB 6,000-6,010/t (eastern China) as compared to RMB 5,860-5,910/t (eastern China) in the previous week.
5. Domestic rebar prices range-bound w-o-w: Domestic rebar prices remained range-bound at RMB 5,250-5,320/t (northern China) as against RMB 5,280-5,300 (northern China) a week ago.
Prices were impacted due to a notice released on 29 Jul’21 by the National Development and Reform Commission (NDRC) to the local government with regard to change in peak-valley power prices for industrial companies. Also, restocking demand went down on rebar future losses. Thereafter, in some parts of China, construction activities slowed down on new Covid cases in the Nanjing province.
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