Weekly: Chinese Steel Market Highlights

The Chinese domestic steel market prices continued to remain volatile on the back of slack demand and rising inventories amid the Novel Coronavirus concern. Meanwhile, most of the market participants are still delaying their resumption to market amid the concern raised on 13 Feb’20 with an increase in the number of new infections reported in Hubei province.

In line with the bearish sentiments caused by the Coronavirus, the Chinese domestic steelmaker Baosteel announced a roll-over of prices for the Mar’20 deliveries in the domestic market.

Further, logistical restraints and low demand kept Chinese HRC, and Rebar export offers downside. Spot iron ore gained upward momentum with active restocking amid tight supplies. Spot pellet premium weighed down this week. However, spot lump premium witnessed an increase. Also, seaborne coking coal prices inched up on tight supply concerns arising in the Chinese and Mongolian coal markets.

Spot iron ore picks up amid active restocking- Chinese spot iron ore prices opened up this week at USD 81.70/MT CFR China and increased to USD 88.35/MT CFR China towards the weekend. The prices picked amid supply tightness and active restocking activities.

Also, logistics remain affected in China amid outbreak of Coronavirus, which, in turn, pushed the prices upwards amid low margins.

As per data compiled by SteelHome consultancy, Iron ore inventory at major Chinese ports recorded at 130.65 MnT as of 13th Feb as against 131.1 MnT assessed a week ago.

Spot pellet premium down 18% W-o-W- Spot pellet premium for Fe 65% grade pellets assessed at USD 32.85/MT CFR China down by 18% as against USD 40/MT last week. Pellet inventory at major ports stood stable on a weekly premise at 4.6 MnT.

Spot Lump premium moves up W-o-W- Spot Lump premium for the weekend witnessed at USD 0.2700/dmtu as compared to USD 0.2655/dmtu in the last weekend. Few traders depicted interest for Feb cargoes co-loaded with fines and lumps. As per sources, the lump premium may face downward pressure on expectations of looser sintering controls.

Coking Coal prices inched up amid anticipated Mongolian coal supplies- The seaborne coking coal prices inched up this week amid expectations of tightness in Chinese domestic and Mongolian coal supplies.

The Mongolia-China borders will remain temporarily closed until March 2 after confirmation of coronavirus cases in Inner Mongolia. The measure was implemented in a bid to contain the spread of the virus.

With Mongolian coal supply now curtailed, Chinese steelmakers had to look for alternatives as domestic coal mines have not yet fully resumed production and were still hampered by logistics issues.

However, a few buyers outside China became cautious and adopted a wait and watch approach as the prices moved up this week.

The latest offers for the Premium HCC grade are assessed at around USD 153.50/MT FOB Australia, which was USD 151.00/MT Fob basis a week ago.

Chinese HRC export offer suffers amid logistical restraints- The Chinese HRC export offer softened by USD 5-10/MT amid the prolonged logistical barriers. Meanwhile, the demand from the overseas buyers too remained slack amid the fear of spreading the virus.

Thus, the current HRC exports offer stands at USD 480-490/MT FoB China, which was USD 490-495/MT FoB basis in the previous week.

Meanwhile, the domestic HRC prices also declined by RMB 70-80/MT to 3,460-3,480/MT (Eastern China) as compared with RMB 3,540-3,550/MT (Eastern China) a week ago. Slack demand amid delayed resumption of downstream consumers contributed to ascend in inventories with sellers, which weighed on the price in the domestic market.

Further, the spreading of the coronavirus has limited the trade areas for traders as buyers are refraining to accept cargo from severely affected areas to avoid any further spread. Along with this, the logistics companies are also delaying resumption or refraining from traveling through highly infected regions in the country.

Chinese Rebar export offers tumbled on weak demand- The persistent weak demand in the rebar segment resulted in a plunge in export offers by USD 15/MT in the Chinese Rebar export offers.

Meanwhile, there was a lull in demand from the Southeast Asian countries as they were cautious of buying materials to avoid infection in their respective countries.

Currently, the Chinese Rebar export offer stands at USD 440-450/MT FoB China, which was USD 455-465/MT in the preceding week.|

However, the domestic rebar prices were largely firm at RMB 3,370-3,400/MT (Eastern China) in comparison with RMB 3,360-3,400/MT (Eastern China). Meanwhile, the market sentiments remain bearish in the nation with most of the construction projects yet to restart. But market participants anticipate the domestic rebar prices to fluctuate in a narrow band.

Source: SteelMint Research