China weekly: Steel prices decline after Golden Week holidays
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As the Chinese market opened after the Golden Week holidays, it registered a fall in the futures market, which, in turn brought down the spot market.
In early-October, the average daily crude steel output of CISA-affiliated mills stood at 2.083 mnt in early October, up 0.81% from 2.066 mnt in late September. However, output edged down by 1.17% y-o-y.
Moreover, Total steel inventory at the China Iron and Steel Association (CISA)-affiliated mills inventories increased by 557,700 tonnes (t), or 3.53%, m-o-m as against 15.803 mnt in early September. In addition, inventory inched up by 0.27% y-o-y.
Other market updates:
a) Baosteel rolled-over prices for November 2023 sales
b) Iron ore imports dropped by 4.91% m-o-m to 101.18 mnt
c) Steel exports in October 2023 recorded at 8.06 mnt, down 2.7% m-o-m
d) Steel imports remained stable m-o-m at 0.64 mnt
Product-wise sentiments
1. China spot iron ore prices drop w-o-w: The benchmark Fe 62% fines index decreased by $1/t w-o-w to $118.45/t CFR China on 13 October. Buying interest in seaborne was bolstered by solid import margins, robust market confidence on iron ore demand, and high operation rates from Chinese steel mills.
Iron ore inventory at major Chinese ports fell by 2.6 mnt to 105.9 mnt on 8 October compared to 108.5 mnt on 28 September, according to SteelHome data. Inventories have fallen to the lowest level since mid-July 2020.
a) Spot pellet premium down w-o-w: Spot pellet premium for the Fe 65% grade pellets decreased by $0.2/t to $20.15/t on 12 September, compared to the previous week.
b) Spot lump premium rises w-o-w: Spot lump premium rose by $0.029 w-o-w to $0.2400/dmtu on 13 October.
2. Coking coal prices up: Coking coal prices rose by 3% w-o-w to $367/t FOB from $347/t FOB last week. Prices increased amid highly tradable levels and limited vessel availability.
3.Chinese billet prices head south post-holidays: Chinese billet prices fell by RMB 40/t ($5/t) to RMB 3,410/t ($467/t) on 13 October, 2023 against 9 October, post Golden Week holidays. Volatility in rebar futures and finished steel prices throughout the week has weighed on billet prices. China's SHFE rebar futures stood at RMB 3,620/t ($456/t), down by RMB 18/t ($2/t) on 13 October against 9 October.
4.HRC prices drop: Domestic HRC prices decreased by RMB 70/t ($1/t) w-o-w to RMB 3,770/t ($536/t) against RMB 3,840/t ($535/t) last week. SHFE HRC futures (January contract) fell by RMB 75/t ($7/t) w-o-w to RMB 3,723/t ($535/t) on 13 October as against RMB 3,798/t ($528/t) last week. The downward trend of futures and the sluggish user-end demand, coupled with overall wait-and-see sentiment was present in the domestic market. China's HRC export offers decreased by $20/t w-o-w to $530/t FOB Rizhao. Even after competitive prices due to low transactional volume and subdued global demand market participants remained in wait-and-watch mode.
5. Domestic rebar prices fall w-o-w: Chinese rebar prices fell by RMB 30/t ($8/t) to RMB 3,680/t ($510/t) as against RMB 3,710/t ($518/t) last week. SHFE rebar futures (October 2023 contract) settled at RMB 3,619/t ($508/t), down by RMB 81/t ($10/t) against RMB 3,700/t ($518/t) a week ago. The stocks levels have remained high due to Golden Week and demand recovery was slow which affected the price levels.
Outlook:
The Chinese steel prices are likely to witness marginal fluctuation in the near term. Excessive supply and low demand have led to high stock levels. Whereas, as the market has disappointed participants as they had expected an increase in price levels post-the Golden Week holidays. However, there is still some optimism about the autumn season (late-September to mid-December) led by favourable climatic conditions to spur the market demand.
