The Chinese steel market saw an increase in finished steel prices along with raw material products, except iron ore which fell over the news of tightening of production curbs.
China’s key statistics for Aug’21:
- Iron ore imports up 10% m-o-m to 97.49 million tonnes (mn t) in Aug
- Finished steel imports largely stable at 1.06 mn t in Aug against 1.05 mn t in Jul
- Finished steel exports fell by 11% m-o-m to 5.05 mn t in Aug
Product-wise sentiments
1. Spot iron ore prices shed off gains towards weekend: Chinese spot iron ore fines Fe 62% prices opened at $131.5/t CNF China for the week and decreased to $128.75/t, CNF China towards weekend. However, in the middle of the week, prices increased to 137.85/t, CNF China.
Steel production cuts in Jiangsu are heard to have been ramped up. This was coupled with news reports of further production cut plans in several regions in China for the upcoming winter season will reduce the country’s blast furnace output.
Steel demand showed some signs of improvement in China towards mid-week, lifting sentiment for iron ore. However, selling pressure remained high for Oct cargoes. High coke prices continued to weigh on buying interest of iron ore with excess impurities. Steel demand and production usually recover in the peak season, i.e. Sept, which boosted iron ore demand. However, due to cutbacks in steel production, pig iron output may fall further this month, thereby depressing iron ore demand.
As more Oct loading cargoes were made available in the seaborne iron ore market, the potential oversupply of spot cargoes in the last quarter of 2021 overshadowed buying interests. As per data compiled by SteelHome consultancy, iron ore inventory at major Chinese ports were recorded at 131.4 mn t last week as against at 129.4 mn t assessed in preceding week.
a) Spot pellet premiums up w-o-w: Spot pellet premiums for Fe 65% grade pellets were assessed at $39.5/t as against $36.05/t assessed last week.
High coke prices in China have seen further upside which fuelled demand for low-alumina pellets in the market. There is increasing demand for such pellets as they are most-preferred alternative against lump ore. As per data compiled by SteelHome consultancy, pellet inventory at major Chinese ports were recorded at 4.4 mn t last week as against 4 mn t assessed a week ago.
b) High supply weighs on spot lump premiums: Spot lump premiums stood at $0.0630/dmtu as against $0.0705/dmtu last week.
The market continued to witness downward correction in lump premiums due to higher supply following the ramp-up of BHP’s South Flank mine and weakening demand from Chinese mills on high coke costs and the decarbonization drive.
2. Coking coal offers up $67/t w-o-w: Seaborne coking coal (HCC) prices surged to a ten-year high level this week on persistent strong demand in Asian markets excluding China alongside limited availability of Oct-Nov laycan spot cargoes.
Nevertheless, buyers looking for restocking are not refraining from purchasing Australian coking coals because of decent steel margins despite prices having reached decadal highs.
However, some buyers chose to withdraw from the spot market and stayed on the side-lines as prices increased sharply.
The latest price for the premium HCC grade is assessed at around $336.00/t FoB Australia as against $269/t FoB in the previous week.
3. Domestic billet prices rise RMB 160/t w-o-w: Steel billet prices in China’s Tangshan rose by RMB 160/t ($25/t) w-o-w. Domestic billet prices stood at RMB 5,200/t ($807/t), inclusive of 13% VAT. According to data maintained with SteelMint, China’s rebar futures contract for Jan’22 delivery closed at RMB 5,640/t ($876/t) on 10 Sep’21, a noticeable increase of RMB 232/t ($36/t) w-o-w.
4. HRC export offers up $10/t on week: Persistent fear of an introduction of export tax duty besides surging marine freight rates continued keeping overseas buyers away from the market.
In addition, import markets viz South East Asia, are most likely to buy Indian and Russian materials rather than Chinese materials because of cost preferences. Prices of Indian origin cargoes are much lower. Hence, Chinese HRC export offers this week moved up by $10/t to $990-1,000/t FoB China as against $970-990/t FoB, a week ago.
In the domestic market, HRC is being traded higher by RMB 90-120/t to RMB 5,850-5,920/t (eastern China) compared with RMB 5,760-5,800/t (eastern China) in the preceding week. Prices rose on the back of tighter production curbs, shut down of mills and several environmental inspections in few regions. These have raised concerns over steel supply in the near term.
5. Domestic rebar prices up w-o-w: Rebar manufacturers were quoting at RMB 5,250-5,280/t (northern China), higher by RMB 110/t as against RMB 5,140-5,170/t (northern China) a week ago.
A notice was released by the Department of Industry and Information Technology (DIIT), stating that Jiangsu province (second largest steel making hub) will be going through decarbonisation compliance of local steel mills with high energy consumption and emissions. This news led to a rally in the futures market and spot rebar prices.
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