This week, Chinese steel prices reported a steep hike on the backdrop of a production cut announcement made by the government to curb air pollution and excess steel output. Along with this Iron ore prices witnessed an uptrend. However coking coal prices remain range bound as buyers have adopted wait and watch mode
Product-wise market sentiments are mentioned below-
1. China spot iron ore prices up during the week- Chinese spot iron ore prices opened at $156.35/t, increased to $161.45/t, CNF China towards the weekend. However, the sentiment for Tangshan iron ore demand remained depressed due to tightening environmental controls. The mills procurement preference had turned towards higher grade materials over given the constraints on capacity utilization and strong steel margins.
China’s iron ore market was bracing for pollution curbs on steelmakers in Tangshan. This has become the new normal after local authorities announced plans to impose production controls on twenty-three steelmakers from Mar 20th to Dec 31st in a bid to lower emissions by 30%-50%.
As per data compiled by SteelHome consultancy, iron ore inventory at major Chinese ports was recorded at 133.65 mn t as against at 133.85 mn t assessed a week ago.
- Spot pellet premium up w-o-w- Spot pellet premium for Fe 65% grade pellets was assessed at $60.95/t, up by $7.35/t. Seaborne iron ore pellet premiums picked up on continued demand. Steelmakers are likely to increase their utilization of pellets given their attractive value-in-use in comparison to sinter feed. As per data compiled by SteelHome consultancy, pellet inventory at major Chinese ports was recorded at 5.2 mn t as against at 5.8 mn t assessed a week ago.
- Spot lump premium up w-o-w- Spot Lump premium was witnessed at $0.5425/dmtu as against $0.5105/dmtu assessed last week. Lump premiums were supported amid sustained supply tightness in the near-term. Meanwhile, there are expectations of improved supply conditions for Australian lumps in the second quarter.
2. Coking coal prices remain range-bound- Seaborne coking coal prices have been edging down on limited deals as buyers wait on the side-lines despite adequate availability, while semi soft and PCI prices are rising amid supply concerns due to the floods in Eastern Australia.
The latest offers for the Premium HCC grade are assessed at around $111.50/t FoB Australia, as against $112.50/t FoB basis.
3. Chinese domestic billet prices surged further- This week; Chinese domestic billet prices settled with a rise of RMB 230 ($35) owing to production cuts. Billet transactions were moderate and the prices of finished steel consolidated within a narrow range. The prices of commonly traded Q235 billet 150mm diameter were reported at RMB 4,710/t ($720/t) in Tangshan, including 13% VAT
4. Nation’s HRC export offers continue to gain momentum on higher domestic prices-
The export offers for HRC (SS400) have moved up by $20-25/t w-o-w to $765-770/t FoB China against the previous week’s range of $740-750/t FoB basis. Major steel mills are offering $780-790/t FoB basis. In the domestic market, the prices were hovering in the range of RMB 5,100-5,150/t (Eastern China) registering a hike by around RMB 100-110/t w-o-w in contrast with RMB 4,990-5,050/t (Eastern China) a week ago.
Reasons driving HRC prices in China-
- Chinese Government ordered production restrictions in Tangshan province to control air pollution and to prevent excess steel output.
- Chinese Government would soon be implementing a reduction in the export rebate from 13% to 8-9% to curb steel output, decrease exports and utilize the material domestically
- Surging marine-freight rates resulted in a steep hike in export offers
- Rally in futures with revival in domestic demand supported the price rise.
5. Domestic rebar offer rises w-o-w with rise in input cost- Rebar producing mills have raised their offers by RMB 80-100/t w-o-w to RMB 4,660-4,680/ t (Northern China) in comparison with RMB 4,560-4,600/t (Northern China) a week ago. Higher rebar futures with rising input material costs i.e billet further led to a surge in demand.
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