China weekly: Domestic steel prices rise w-o-w amid restocking demand before Golden Week holidays

China's domestic steel prices saw an uptrend this week due to an improved demand from end-users ahead of the "Golden Week" or National Day holidays (1-7 October, 2022). However, the Chinese currency depreciation weighed on HRC export offers and iron ore prices.

Product wise sentiments-

1. China spot iron ore prices edge down w-o-w: Chinese spot iron ore fines Fe 62% prices opened at $96.05/t CNF China for the week and assessed at $95.95/t, CNF China towards the weekend. Seaborne iron ore prices were range bound amid less market activity ahead of the holidays and the depreciating yuan against the dollar led to limited buying. Traders were also cautious and preferred to wait until after the holidays.

Iron ore inventory at major Chinese ports stood at 135.1 mnt this week, moving down by 2.7 mnt as against 137.8 mnt a week ago, as per data maintained by SteelHome.

a) Spot pellet premium increases w-o-w: Spot pellet premium for Fe 65% grade pellets was assessed at $26.2/t, up as against $24.45/t last week.

b) Spot lump premium up w-o-w: Spot lump premium stood at $0.1975/dmtu, up against $0.1520/dmtu last week.

Market participants' views on lump premiums are mixed as some see short-term strength for lump on sintering cuts, but if poor mill margins persist, it may cap the growth of seaborne premiums, others believe.

2. Coking coal prices up w-o-w: Coking coal prices rose by $12/t w-o-w to $271/t FOB Australia against $259/t FOB last week. The price recovery came on the expectations of a pick up in Indian demand with monsoon nearing its end and the restocking of raw material gaining steam for upcoming months.

3. China's billet prices edge up towards weekend: Steel billet prices in China's Tangshan increased by RMB 30/t ($4/t) w-o-w. Prices stood at RMB 3,680/t ($517/t), including 13% VAT on 30 September. According to data maintained with SteelMint, China's SHFE rebar futures contract for January 2023 delivery closed at RMB 3,799/t ($534/t) on 30 September, a rise of RMB 33/t ($5/t) w-o-w.

4. HRC export offers unchanged w-o-w: The depreciation of Chinese currency against dollar weighed on the export offers. Chinese HRC (SS400) export offers remained unchanged w-o-w at $575/t FOB China. Moreover, demand remained muted and no new orders were taken by mills before the holiday week.

Chinese domestic HRC prices edged up by RMB 10/t ($1/t) w-o-w to RMB 3,970/t ($558/t) in the northern China as compared with RMB 3,960/t ($556/t) a week ago. Prices rose amid active stocking activities by buyers.

Shanghai Futures Exchange (SHFE) HRC futures rose by RMB 43/t ($6/t) w-o-w to RMB 3,863/t ($543/t) as on 30 September 2022.

5. Domestic rebar prices up by RMB 30/t ($4/t): China's domestic rebar prices rose by RMB 30/t ($4/t) w-o-w to RMB 4,160/t ($585/t) in western China as compared with RMB 4,130/t ($580/t) a week ago. End-users started restocking on anticipation of strong demand ahead of the National Day festival, which led to an increase in prices.

China's rebar inventory fell sharply by 6% w-o-w to 3.92 mnt in contrast with 4.18 mnt a week ago.