China’s domestic steel market prices continued with the downward trajectory this week over volatile futures and dull buying sentiments. The government further tightened its production curb norms in the steel hubs of Heibei, Shanxi, Shandong, Henan, and Shaanxi from Nov’21 till Mar’22 to restrain pollution.
Thus, a low demand base amid production restrictions and the seasonally weak demand period of winter,that will start soon, have dampened demand for both iron ore and upstream ferrous products like rebar and hot rolled coils (HRCs).
1. China spot iron ore prices decline: Chinese spot iron ore prices dropped on weak demand. Prices of fines Fe 62% opened at $103.3/t CNF China for the week but decreased to $92.75/t, CNF China towards weekend.
Seaborne iron ore prices fell below $100/dmt for first time since 22 Sept’21 on weaker Chinese demand outlook in winter. Prices fell tomulti-month lows on 2 Nov’21, dragged by the decline in futures on the back of steel production cuts, power issues, falling steel demand, and oversupply of iron ore.
Sintering controls, steel production curbs and weakening downstream steel demand in winter saw portside prices sinking and buyers bidding lower for seaborne spot cargoes. Premium and discount levels weakened for iron ore fines.
For the remainder of this year, the market is expected to see a fall in steel prices and weak margins will contribute to lower demand for raw materials. Iron ore inventory at major Chinese ports increased to 145.1 mn t this week as against 142.3 mn t a week ago, as per data maintained by SteelHome.
a) Spot pellet premium up slightly w-o-w: Spot pellet premium for Fe 65% grade pellets were assessed at $76.7/t, up $0.40/t w-o-w. China’s steel industry is making continuous efforts to keep its CY’21 crude steel output within CY’20 levels since Jul’21, serving the country’s broader objective of reducing carbon emissions. In October, China released a new carbon peaking action plan that called for the steel industry to continue capping its iron and steel making capacity, especially around Beijing, Tianjin and Hebei regions.
Total pellet inventory at China’s major ports was recorded at 4.1 mn t as against 4.3 mn t, a week ago.
b) Spot lump premiumflat w-o-w: Spot lump premium continued hoveringat $0.2200/dmtu this week. Market sources reported increased usage of iron ore lumps in China. Sources said the winter sintering controls were boosting lumps demand as their usage ratio has increased in blast furnaces being more cost-effective than pellets.
2) China’s billet prices down RMB 100/t w-o-w: Steel billet prices in China’s Tangshan declined by RMB 100/t to RMB 4,800/t ($766/t), inclusive of 13% VAT. According to data maintained with SteelMint, China’s SHFE rebar futures contract for Jan’22 delivery closed on 5 Nov’21 at RMB 4,247/t ($664/t), witnessing a sharp decline of RMB 399/t ($62/t) w-o-w.
3) HRC export offers dip further: The Chinese mills reduced their offers significantly this week amid volatile futures and low falling domestic market prices. Furthermore, concerns around the long-awaited export tax announcement by the government continued denting demand for Chinese-origin HRCs. The export offers have come down to $860-890/t FOB China from $940-960/t FOB China a week ago.
Domestic prices also tumbled this week on weak buying interest as power supply concerns and high raw material prices kept weighing on downstream industrial demand. The prices have fallen by around RMB 380/t w-o-w to RMB 4,950-5,000/t (Eastern China).
4) Domestic rebar prices continue to fall: This week, domestic rebar prices declined by around RMB 370/t, marking the fourth consecutive week of decline. Volatile futures and falling prices kept weighing on buyers’ sentiment. Also, buyers have adopted a wait-and-watch approach amid unclear price directions. The prices stood at around RMB 4,780-4,820/t (Northern China) towards the end of the current week.
5.Shagang Steel slashes scrap purchase price by $8/t: Shagang Jiangsu Steel announced another reduction in its scrap procurement prices in Nov’21 by RMB 50/t ($8/t) for all grades of ferrous scrap. Scrap demand of Jiangsu’s steel mills is low because of a weak market outlook, SteelMint notes.
After the revision, the prices of HMS (6-10 mm) stand at RMB 3,520/t ($550/t), including 13% VAT.
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