China weekly: Domestic prices edge down w-o-w amid lower seasonal demand

Steel prices in China dipped slightly this week due to reduced demand as the country transitions into the winter season. Additionally, Chinese SHFE futures for HRC and rebar exhibited volatility this week. Despite this, spot iron ore prices rose this week thanks to improved production margins for mills, while coking coal prices declined due to ample material availability.

Total steel inventories at the China Iron and Steel Association (CISA)-affiliated mills rose by 640,300 tonnes (t), or 4.36%, to 15.33 million tonnes (mnt) in mid-November 2023 compared to 14.69 mnt in early-November 2023.

The average daily crude steel output of CISA-affiliated mills stood at 1.969 mnt in mid-November 2023, down marginally by 0.08% from 1.971 mnt in early-November 2023.

Product-wise sentiments

1. Iron ore spot prices rise w-o-w: The benchmark Fe 62% fines index increased by $6/t w-o-w to $135.6/t CFR China on 24 November. Iron ore prices went up amid strong recovery in domestic demand and production margins. As per report, due to improved margins from mills along the coastal area, portside prices have been gradually rising and mills are now increasing their purchases on an as-needed basis.

Iron ore inventory at major Chinese ports inched up by 0.9 mnt stable at 108.5 mnt on 23 November compared to the previous week, according to SteelHome data.

a) Spot pellet premium marginally down w-o-w: Spot pellet premium for Fe 65% grade pellets fell by $0.3/t to $21/t on 24 November, compared to the previous week.

b) Spot lump premium rises w-o-w: Spot lump premium decreased by $0.019 w-o-w to $0.1940/dmtu on 24November.

2. Coking coal prices drop w-o-w: Coking coal prices dropped by 2% w-o-w to $319/t FOB on 25 November 2023 amid sufficient material availability.

3. Chinese billet prices fall w-o-w: Chinese billet prices fell by RMB 10/t ($1/t) to RMB 3,650/t ($510/t) on 24 November against 17 November. Volatility in rebar futures and lower demand due to winter season in the region have weighed on billet prices. However, Chinese SHFE rebar futures inched up by RMB 47/t (7/t) w-o-w to RMB 3,976/t ($556/t) today.

4. Domestic HRC prices edge down w-o-w: Domestic HRC prices edged down by RMB 20/t ($3/t) w-o-w to RMB 3,940/t ($555/t) against RMB 3,960/t ($557/t) a week ago. Prices edged lower amid lower seasonal domestic demand and volatile SHFE HRC futures. The SHFE HRC futures (January contract) went down by RMB 23/t ($3/t) w-o-w to RMB 4,017/t ($566/t) on 24 November as against RMB 4,040/t ($569/t) a week ago.

On the other hand, China's HRC export offers increased by $15/t w-o-w to $565/t FOB Rizhao as against $550/t FOB last week. An excess supply of finished steel in the domestic market coupled with subdued demand has propelled China's steel products to the forefront of the international steel market. Chinese steel has seized a competitive edge in price when pursuing global opportunities, where steel supply is diminishing while demand is escalating.

5. Rebar prices inch down w-o-w: Chinese rebar prices inched down by RMB 20/t ($3/t) w-o-w to RMB 3,900/t ($549/t) as against RMB 3,920/t ($553/t) a week ago. SHFE rebar futures (January contract) settled at RMB 3,937/t ($555/t) on 24 November, down RMB 20/t ($3/t) against RMB 3,957/t ($557/t) a week ago. As China enters the winter season, construction activity typically slows down, leading to reduced demand for rebar.

6. Shagang Steel raises steel prices : China's Shagang Steel has hiked steel prices by RMB 200/t ($28/t) for late-November 2023 sales. Effective prices-

• Rebar (16-25 mm): RMB 4,200/t ($589/t)
  
  
• Wire rod (6-10 mm): RMB 4,290/t ($602/t)
  
  
• Coiled rebar (8-10 mm): RMB 4,380/t ($614/t)
  
  
• All prices are ex-mill, including VAT. Revised prices are effective from 21 November, 2023.
  
  

Outlook: Despite positive signals such as rising iron ore prices and government infrastructure investment, domestic demand is expected to remain subdued as colder weather in the northeast and production control policies in some regions dampened demand.