China weekly: Domestic steel prices rise w-o-w amid measures to stabilise economy

This week Chinese steel prices witnessed an uptrend as market sentiments were boosted and trade activities for finished steel products and raw materials regained momentum amid the state council's efforts to stabilise the economy and easing of lockdown with a decline in new Covid cases. However, the surplus inventories of coking coal with sellers weighed on its prices.

Product wise sentiments-

1. China spot iron ore prices increase w-o-w: Chinese spot iron ore fines Fe 62% prices opened at $136.6/t CNF China for the week and assessed at $143.65/t, CNF China towards the weekend. Seaborne iron ore prices rose with a recovery in Chinese steel demand and continued destocking at the ports.

Iron ore inventories at Chinese ports have continued to decline. Demand is expected to rise after the Dragon Boat Festival. Inventory at major ports stood at 134.30 mnt this week, down by 2.95 mnt as against 137.25 mnt a week ago, as per data maintained by SteelHome.

a) Spot pellet premium up w-o-w: Spot pellet premium for Fe 65% grade pellets was assessed at $41.80/t, up against $39.85/t last week.

b) Spot lump premium decreases w-o-w: Spot lump premium stood at $0.2995/dmtu, decreasing as against $0.3405/dmtu last week.

Lump premiums continued to be under pressure as pellets could be more cost effective, according to sources.

2. Coking coal prices fall w-o-w: Australian coking coal prices fell amid low buying interest and availability of surplus unsold stock with sellers. Premium HCC prices saw a fall of $46/t w-o-w. The latest price on 3 June 2022 was assessed at $419/t FOB Australia against $465/t FOB last week.

3. China's billet prices rise towards weekend: Steel billet prices in China's Tangshan witnessed a rise of RMB 50/t ($7/t) w-o-w following a sharp hike in rebar futures ahead of the public holidays. Prices stood at RMB 4,500/t ($676/t), inclusive of 13% VAT, on 2 June. According to data maintained with SteelMint, the SHFE rebar futures contract for October 2022 delivery closed at RMB 4,788/t ($719/t) on 2 June, witnessing a sharp w-o-w rise of RMB 283/t ($42/t).

4. HRC export offers drop w-o-w: China's HRC export offers dropped $9/t to $780/t FOB, against $789/t FOB in the previous week. Buyers were bidding low to bargain, but lower bids were not accepted due to optimism in the domestic market.

China's state council made an announcement to stabilise the economy, which boosted the market sentiments this week. This led to rise in domestic HRC prices by RMB 100/t ($15/t) to RMB 4,860-4,880/t ($730-733/t) eastern China, against RMB 4,760-4,780/t ($715-718/t) eastern China a week ago.

In addition, China's purchasing managers' index (PMI) rose to 49.6 in May 2022, compared with 47.4 in April 2022, as per data maintained with the National Bureau of Statistics (NBS).

5. Domestic rebar prices up RMB 40/t ($6/t) w-o-w: China's domestic rebar prices went up by RMB 40/t ($6/t) to RMB 4,720-4,750/t ($709-713/t) northern China against RMB 4,680-4,710/t ($703-707/t) northern China last week. Shanghai plans to lift the lockdown amid dropping Covid cases, boosting the market sentiments this week.

Also, demand for rebar is likely to increase as construction activities to resume operations in the first week of June.

6. Shagang's long steel prices unchanged: Steel product prices remained unchanged for early-June 2022 sales. Current prices of long steel products are:

• Rebar (16-25 mm): RMB 5,350/t ($803/t)
  
  
• Wire rods (6-10 mm): RMB 5,310/t ($797/t)
  
  
• Coiled rebar (8-10 mm): RMB 5,400/t ($811/t)
  
  

All prices are on ex-mill basis, including VAT.