China weekly: Domestic prices show mixed trends w-o-w amid market recovery post-holidays

Chinese domestic steel prices showed mixed trends w-o-w as SHFE futures were volatile for the week post-year end holidays. HRC, rebar and coking coal prices increased w-o-w. On the other hand, iron ore and billets prices remained unchanged. Moreover, HRC export offers remained flat.

The average daily crude steel output of CISA-affiliated mills stood at 1.666 million tonnes (mnt) in late-December 2023, fell by 13.63% from 1.932 mnt in mid-December 2023.

The steel inventory of key steel enterprises in late-December 2023 was 12.360 mnt, a decline of 2.657 mnt or 17.69% against mid-December 2023.

Product-wise sentiments

1.Iron ore spot prices remain stable w-o-w: The benchmark Fe 62% fines index remained marginally stable at $140.3/t CFR China on 5 January due to anticipated high liquidity in the Chinese economy. The recent interest rate cut by Chinese banks at the end of 2023 and expectations of enhanced financial market liquidity in the first quarter of 2024 have bolstered market confidence, indicating the nation's commitment to utilising monetary measures for swift economic development. However, blast furnace maintenance was initiated by certain steel mills in northern, eastern, and northeastern China this week due to unfavorable steel production margins despite warmer weather.

Iron ore inventory at major Chinese ports increased by 1.5 mnt to 116 mnt on 4 January compared to the previous week, according to SteelHome data

a) Spot pellet premium declines w-o-w: Spot pellet premium for Fe 65% grade pellets sharply fell by $1.5/t w-o-w at $15/t on 3 January.

b) Spot lump premium rises marginally w-o-w: Spot lump premium increased marginally by 0.019 w-o-w at $0.2/dmtu on 5 January.

2.Coking coal prices rise w-o-w: Coking coal prices rose by 3% w-o-w to $333/t FOB on 6 January 2024 amid improved demand from India.

3.Chinese billet prices remain stable w-o-w: Chinese domestic billet prices remained stable w-o-w at RMB 3,660/t ($515/t) on 5 January. Positive market sentiments from raw material, finished steel and returning of few mills after maintenance shutdown easing the supply pressure have kept billet prices supported. However, Chinese SHFE rebar futures decreased by RMB 23/t ($3/t) w-o-w to RMB 3,979/t ($560/t).

4.Domestic HRC prices increase w-o-w: Domestic hot-rolled coil (HRC) price increased by RMB 20/t ($3/t) w-o-w to RMB 4000/t ($562/t) this week as compared to RMB 3,980/t ($559/t) in the previous week. HRC prices saw an early jump followed by a period of stability, but they finished the week on an upward climb. The SHFE HRC futures (May contract) stood marginally stable w-o-w at RMB 4,106/t ($577/t) on 5 January.

However, Chinese HRC export offers remained stable at $575/t, as cautious buyers await post-holiday market clarity.

5.Rebar prices hike w-o-w: Chinese rebar prices hiked by RMB 20/t ($3/t) w-o-w to RMB 3,900/t ($545/t) as against RMB 3,880/t ($546/t) a week ago. SHFE rebar futures (May contract) is edged up by RMB 11/t ($2/t) w-o-w to RMB 4,011/t ($565/t) on 5 January.

SHFE futures prices showed an upward trend, indicating that market participants expect physical steel prices to rise further in the coming months. This anticipation of higher prices impulse the buyers to stock up on rebar , leading to increased demand and consequently, increasing prices.

6.Shagang Steel keeps long steel prices unchanged: China's Shagang Steel has kept prices of rebar, wire rod, and coiled rebar stable for early-January, 2024 sales. Effective prices-

Outlook

The Chinese steel market appears to be recovering after the holidays, with some product prices showing upward momentum. SHFE futures prices suggest market participants expect further price increases in the coming months, potentially leading to increased demand and further price hikes. However, cautious buyers and flat export offers indicate some uncertainty in the market.