Weekly: Chinese Steel Market Highlights

Steel prices in the nation gained further hike this week on boosted market sentiments with the beginning of the annual meetings – “two sessions”, which have also led to a rise in the futures. However, the government’s decision of cancelling the announcement of the estimate for GDP growth rate this year kept market sentiments from soaring higher.

The HRC and rebar export offers reported increase on a weekly basis. Spot iron ore prices rose on the back of robust demand and supply concerns. Coking coal prices up on decent booking in the past couple of weeks.

Spot Iron ore prices up during the week on strong demand-

Chinese spot iron ore prices witnessed at USD 96.15/MT towards the beginning of the week, increased over USD 97/MT during the week before falling to USD 96.85/MT, CFR China towards the weekend. The prices have picked up amid strong demand and supply concerns. The poor weather conditions continue to affect Brazilian export volumes.

The country recorded total crude iron ore production at 74.38 MnT in Apr’20, down slightly as against 74.76 MnT in Mar’20.

As per data compiled by Steel Home consultancy, Iron ore inventory at major Chinese ports dropped to 110 MnT assessed this week as against last week’s assessment at 111.95 MnT.

Spot pellet premium up W-o-W-

Spot pellet premium for Fe 65% grade pellets assessed at USD 20.15/MT this week against USD 19.40/MT last week. The prices have picked up due to the rising preference for low alumina pellets amid concerns from Brazilian low alumina supplies.

Spot lump premium fell on the week-

Spot lump premium witnessed fall to USD 0.1400/dmtu as against USD 0.1985/dmtu a week before. There is a limited spread between pellet and lumps presently and with low steel margins, preference for a change in direct feed remains on the lower side.

Also, the lump premium remained supported due to continued pressure by the Australian lumps arriving at ports. However, end-users may shift their buying interest to lumps over pellets if prices continue to jump in the near term.

Coking coal price rebound on recent deals concluded to China-

Seaborne coking coal prices have recovered modestly over the past two weeks with recent bookings concluded at higher levels in China.

In China, improved steel sales and production levels post lockdown have led to increased demand for metallurgical coal and coke. Chinese buyers are concerned about tightening port policies and considering higher costs incurred for procuring seaborne coals due to longer waiting times at the ports.

The latest offer for the Premium HCC grade assessed at around USD 116.00/MT FoB Australia, which was USD 114.00/MT FoB basis a week ago.

Nation’s political conference driving domestic billet prices-

The domestic billet prices in China are at RMB 3,270/MT ex Tangshan (including VAT), up by RMB 110, against last week. The sharp hike is primarily due to the political conference in Beijing held on 21-22 May’20.

According to market sources reported to SteelMint, the conference would focus on China’s next economic moves. It is also expected that the conference outcome could limit production and transportation activities with some stimulus packages. Thus, prices and sentiments in the country got positively driven.

HRC export offers continue to increase on rising domestic prices-

The decent demand from the construction and infrastructure sectors kept the domestic market prices on the higher side. This in-turn pushed steel mills to raise their HRC export offers by USD 5-10/MT during the week. Current export offer stands at USD 425-430/MT FoB China as compared with USD 415-420/MT FoB basis a week ago.

The domestic HRC price also rose by around RMB 20-30/MT to RMB 3,460-3,570/MT (Eastern China), which was RMB 3,430-3,450/MT (Eastern China) in the preceding week.

Meanwhile, market participant’s anticipated short supply with mills in the Northern Province due to production cuts scheduled from 18th May until 31 May’20 to improve air quality ahead of the week-long annual meeting of National People’s Congress and Chinese People’s Political Consultative Conference scheduled from 22 May’20 pushed HRC prices in the domestic market.

Rebar export offers to move up marginally on the week-

The nation’s export offers moved up marginally by USD 3-5/MT on a weekly basis following a surge in domestic rebar prices. The current export offer is assessed at USD 445-455/MT FoB China, which was USD 442-450/MT FoB basis a week earlier.

Meanwhile, the domestic prices also increased significantly by RMB 100/MT and stood at RMB 3,560-3,590/MT (Eastern China) in contrast with RMB 3,460-3,490/MT (Eastern China) in the prior week.

Domestic prices gained momentum on strong futures on expected stimulus packages from two sessions.

Source: SteelMint Research