China weekly: Key steel mills lift domestic offers on hike in exports offers

This week, China's domestic HRC and rebar prices registered a marginal decline following the National Development and Reform Commission's (NDRC's) announcement that they would punish any violations such as manipulating or hoarding in commodity prices besides dull end-user demand due to increase in Covid-19 cases.

Exports offers, on the other hand, rose because of increased inquires for Chinese-origin cargoes from Europe and Turkey due to the Russia-Ukraine crisis.

Product-wise sentiments

1. China spot iron ore prices decrease on week: Chinese spot iron ore fines Fe 62% prices opened at $162.75/t CNF China for the week and assessed at $154.5/t, CNF China towards the weekend. Seaborne iron ore prices surged in the beginning of the week on expectations of tight supply due to the Russia-Ukraine conflict. Later, iron ore prices continued to trend lower as the market saw price uncertainty affecting the seaborne buying appetite.

Buying interest in the market was moderate, but those holding cargoes have received inquiries, mostly for heavily discounted medium-grade fines or direct feeds like lump, sources said.

Iron ore inventory at major Chinese ports stood at 158.9 mnt this week, inching down by 1.1 mnt as against 160 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 $54.75/t, up against $58.45/t last week. Seaborne Indian pellet premiums increased this week on continued European demand.

b) Spot lump premium increases w-o-w: Spot lump premium stood at $0.4315/dmtu as against $0.3850/dmtu, last week. Seaborne lump premiums strengthened with continued supply tightness of mainstream lumps.

2. Coking coal prices surge $100/t on week: Seaborne coking coal prices surged by $100/t this week amid the ongoing Russia-Ukraine conflict and increased demand for Australian coal from European mills.

The latest price for the premium HCC grade is assessed at around $660/t FOB Australia in contrast with $560/t FOB a week ago.

3. China's billets prices up towards weekend: Steel billets prices in China's Tangshan witnessed a significant rise of RMB 40/t ($6/t), w-o-w. Domestic billets prices stood at RMB 4,720/t ($744/t), inclusive of 13% VAT, on 11 Mar'22. According to data maintained with SteelMint, the Chinese SHFE rebar futures contract for May'22 delivery closed at RMB 4,917/t ($775/t) on 11 Mar'22, a marginal increase of RMB 16/t ($2/t), w-o-w.

4. HRC export offers rise w-o-w: China's HRC export offers climbed to $910-920/t FOB China this week as compared to $880-890/t FOB a week ago. Increased inquiries from Turkey and Europe amid the supply gap created by the Russia-Ukraine war kept prices supported. However, Chinese steel majors were unable to conclude deals to Europe on higher freight rates and anti-dumping duties. The freight rates from China to Europe are estimated to be around $150-200/t, as per media reports.

In the domestic market, HRC prices hovered at around RMB 5,090-5,100/t ($803-804/t) eastern China, down RMB 60/t ($9/t) compared with RMB 5,150-5,160/t ($812-814/t) eastern China in the previous week. Tighter production cuts through Beijing Winter Paralympics and annual plenary meeting called "Two session" along with a sharp fall in futures resulted in a decline in domestic HRC prices.

China's Baosteel announced a hike of RMB 200-300/t ($32-47/t) m-o-m for flat steel products for Apr'22 bookings on the back of the surge in global steel prices fuelled by increased production costs and rising demand. The steel major raised prices by RMB 200/t ($32/t) for HRC, plates, pickled sheets and coils and by RMB 300/t ($47/t) for CRC and HDG.

5. Domestic rebar prices inch down w-o-w: China's domestic rebar prices stood at RMB 4,780-4,820/t ($754-760/t) northern China, down by RMB 20/t ($3/t) compared to RMB 4,800-4,840/t ($757-763/t) northern China in the previous week. During the week, the National Development and Reform Commission (NDRC) announced that it will keep a check on commodity pricing and will also raise production rates of mineral products to ensure stable availability and prices. Following the announcement, the ferrous futures market plunged. Moreover, demand from end-user segment remained dull on rising Covid cases.

6. Shagang Steel hikes construction steel prices: China's Shagang Steel increased long steel product prices for mid-Mar'22 sales on 11 Mar'22, amidst bullish global sentiments and rise in raw material costs. Effective prices:

• Rebar (16-25 mm): RMB 5,200/t ($822/t)
  
  
• Wire rods (6-10 mm): RMB 5,310/t ($840/t)
  
  
• Coiled rebar (8-10 mm): RMB 5,400/t ($854/t)
  
  

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

7. Shagang scrap purchase prices rise $13/t: China's leading electric arc furnace (EAF) steelmaker, Jiangsu Shagang Group, raised its scrap purchase prices by RMB 80/t ($13/t) on 7 March compared to prices seen on 7 Jan'22. Notably, this is the second hike in CY'22, after a gap of two straight months. The current prices of HMS (6-10 mm) stand at RMB 3,770/t ($597/t), including 13% VAT, delivered to headquarters.

With this, the company's scrap purchase bids hit over four-month highs as the same levels were last seen in end-Oct'21.