Chinese Steel Prices on a Free Fall – Week 47, 2018

This week Chinese steel market was characterized with pessimistic market outlook with significant fall in steel prices over dwindling demand in domestic and export market. Nation’s steel prices plunged and has reached to the lower levels amid volatility in futures and increased supply in domestic market.

Flat steel and rebar export drop sharply on weekly basis over thin trades.Billet export offers fell further over sharp decline in domestic prices. Meanwhile iron ore prices also decline towards the weekend.

China’s Shagang Steel slashed its scrap purchase price twice by RMB 50/MT and RMB 60/MT on 20th & 22nd Nov this week. It is paying RMB 2,620/MT inclusive of 16% VAT for HMS (6-10 mm thickness) in Zhangjiagang, down total RMB 110/MT as against last weeks’ report. Shagang also reduced its rebar and wire rod prices by RMB 150-180/MT for late Nov shipments.

China’s high grade iron ore prices fall – Chinese spot iron ore prices opened up this week at USD 75.45/MT,CFR China and reduced to USD 70.13/MT, CFR China towards the week end, recording lowest since mid of Oct’18. The prices for high grade ore depicted fall due to narrowing steel margins and preference for low grade amid expectation of less stringent regulations in Chinese market.

Medium grade are less expensive compared to lower grade fines as they are in in high demand due to continued need to lower production cost. Thus lead to reduced price gap between low grade and high grade iron ore.

China’s crude iron ore production: According to National Bureau of Statistics,China’s iron ore (ROM) production for the duration Jan-Oct’18 witnessed at 655.74 MnT down 41% against (Jan-Oct’17) at 1102.72 MnT. The country witnessed crude iron ore production (ROM) at 68.82 MnT in Oct’18, up 3% as against 66.93 MnT in Sep’18. On yearly basis, the output declined by 43% compared to 120.07 MnT in Oct’17.

Buying interest of imported pellet from Chinese mills remained on lower side amid increased supply in domestic market.High grade ore consumption has reduced downward movement of steel prices and increased port inventories. However, Chinese Hebei province has issued second level production cut from 22nd Nov amid visible threat to environment, which in turn may lead to uptick in high grade ore demand.

Coking coal prices remain largely stable- Seaborne coking coal prices remains stable amid thin trades.Meanwhile weakening coke prices in domestic market also kept coking coal prices stable.

Meanwhile in China, with ports exhausting their coal import quotas,the National Development and Reform Commission (NDRC) has enforced import restrictions from last week that stopped the purchase of imported coal till further notice.

Currently Premium HCC offers of coking coal is around USD 225/MT FoB Australia.However last week the offers were at USD 223/MT FoB basis.

Chinese billet prices fall as offers for export reappear in SE Asia – Chinese domestic billet prices fell by over RMB 300-400/MT against last week amid rising inventories. Towards the week end prices closed at RMB 3,330/MT (ex-works in Tangshan) including 17% VAT.

After observing sharp decline in domestic prices, Chinese mills turned active for exports too. Chinese billet export offers reappeared in SE Asian nations after a long gap however buyers remained suspicious before concluding any deal about less clarity on Chinese steel prices outlook.

Chinese HRC export offers drop sharply – Chinese HRC export offers dropped further owing to bearish market sentiments and pessimistic outlook in domestic market. Meanwhile weak futures also supported decline in prices.

Currently HRC export offers from China is assessed around USD 490-500/MT FoB basis. However in the beginning of the week the same was assessed around USD 500-505/MT FoB basis.

Meanwhile prices of HRC in the domestic market decline sharply by RMB 70-80/MT. Presently domestic HRC is assessed at RMB 3,730-3,750/MT (ex-works) in Eastern China.

Also overseas buyers are expecting further decline in HRC export offers from China.

Chinese Re-bar export offer plunge over weak trades- Nation’s re-bar export offers witness significant decline on weekly basis owing to weakening market sentiments in domestic market.Thus domestic prices weigh on re-bar export offers from China.

Nation’s rebar export offers slump by USD 25-35/MT W-o-W basis.Currently, nation’s re-bar export offers are at USD 515-538/MT FoB China.Last week rebar export offers was assessed at USD 550-560/MT FoB basis.

Domestic rebar prices fell by RMB 400-420/MT on weekly basis and is assessed at RMB 3,920-3,950/MT in (Eastern China) as compared to RMB 4,420-4,320/MT (Eastern China).

Meanwhile with the onset of winter season weak demand may further lead to decline in prices.

Chinese Iron and Steel Prices Week 47,2018

Source- SteelMint Research