China weekly: Domestic steel prices rise w-o-w following gains in futures

This week, Chinese steel prices across various categories witnessed mixed trends. Prices in the domestic market rose following gains on the Shanghai Futures Exchange (SHFE) and the State Council's measures to stabilize the economy. However, HRC export offers fell amid weak demand in overseas markets.

Steel inventory at key Chinese mills stood at 17.32 mnt in mid-August 2022, a m-o-m increase of 0.27 mnt, or 1.64%, as per China Iron and Steel Association (CISA) data. Inventory increased by 6.03 mnt or 53.40% compared with the beginning of this year and was up 2.39 mnt, or 16.04% against mid-August 2021.

The average daily crude steel output of CISA-affiliated mills stood at 1.99 mnt in mid-August 2022.

Product wise sentiments:

1. China spot iron ore prices up w-o-w: Chinese spot iron ore fines Fe 62% prices opened at $100.65/t CNF China for the week and were assessed at $105.8/t, CNF China towards the weekend.

Seaborne iron ore prices rose amid improved seaborne liquidity. Seaborne buying interest continued see an uptrend , with quick improvements seen in the floating values of mainstream medium-grade fines.

Iron ore inventory at major Chinese ports stood at 140.4 mnt this week, up by 1.2 mnt as against 139.2 mnt a week ago, as per data maintained by SteelHome.

a) Spot pellet premium down w-o-w: premium for Fe 65% grade pellets was assessed at $24/t, down as against $25.45/t seen last week.

b) Spot lump premium stable w-o-w: Spot lump premium stood at $0.1000/dmtu, stable since last week. Lump premiums continued to remain stable and market participants expect an uptick only if steel margins improve.

2. Coking coal price range-bound w-o-w: Coking coal prices remained rangebound this week at $274/t FOB against $271/t FOB in the previous week. There was no major improvement in demand while a La Nina impact in Australia is expected that would affect supplies and support prices.

3.China's billet prices rise towards weekend: Steel billet prices in China's Tangshan rose by RMB 110/t ($16/t) w-o-w following a sharp hike in rebar futures. Prices stood at RMB 3,770/t ($549/t), including 13% VAT, on 26 August, 2022. According to data maintained with SteelMint, China's SHFE rebar futures contract for October 2022 delivery closed at RMB 4,097/t ($596/t) on 26 August, a sharp increase of RMB 168/t ($24/t) w-o-w.

4. HRC export offers down $15/t w-o-w: China's HRC (SS400) export offers fell by $15/t w-o-w to $605/t FOB China against $620/t a week ago. Weak demand for Chinese-origin HRCs due to competitive offers from other exporting nations have led to the decline in offers.

China's domestic HRC prices increased by RMB 100/t ($16/t) w-o-w to RMB 4,020/t ($585/t) in northern China compared with RMB 3,920/t ($570/t) in the previous week. This week, the State Council added follow-up measures to stabilize the economy which lifted market sentiments. Moreover, gains in SHFE futures led to increase in spot prices.

China's HRC stocks registered a sharp fall of 4% w-o-w to 2.47 mnt as on 26 August, against 2.57 mnt a week ago.

According to data maintained with SteelMint, SHFE HRC futures contract for October delivery increased w-o-w by RMB 165/t ($24/t) w-o-w to RMB 4,061/t ($591/t) as on 26 August.

5.Domestic rebar prices unchanged w-o-w: China's domestic rebar prices remained largely stable w-o-w at RMB 4,160/t ($605/t) in western China. However, end-users turned active in buying towards the end of the week.

6.Shagang rolls over long steel prices: China's Shagang Steel rolled over long steel products prices for late-August sales. Effective prices are thus:

• Rebar (16-25 mm): RMB 4,500/t ($655/t)
  
  
• Wire rods (6-10 mm): RMB 4,510/t ($656/t)
  
  
• Coiled rebar (8-10 mm): RMB 4,600/t ($669/t)