China weekly: Steel prices decline amid sluggish demand, spike in Covid cases

This week Chinese steel prices declined amidst sluggish demand, spike in covid cases coupled with adverse weather conditions. China's demand for construction had shown an uptrend from late May, driven by infrastructure investment. However, this week, construction steel market transactions have shrunk again, leading to inventory accumulation.

China's crude steel production fell 3.5% y-o-y to 96.61 mnt in May 2022. However, the volumes rose by 4% m-o-m compared with 92.78 mnt in April 2022, as per National Bureau of Statistics (NBS).

Product wise sentiments:

1. China spot iron ore prices decrease on week: Chinese spot iron ore fines Fe 62% prices opened at $134.20/t CNF China for the week and assessed at $122.15/t, CNF China towards the weekend. Seaborne iron ore prices decline further as bearish demand outlook weighed on iron ore prices.

As steel margins continued to face pressure due to the weak steel demand and rising coke prices, steel mills were heard to be lowering their buy tender prices for domestic concentrate.

Iron ore inventory at major Chinese ports stood at 128.30 mn t on 9 Jun'22 decreased by 3.70 mnt as against 132 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 $38.15/t, moved up against $36.30/t last week.

b) Spot lump premium decrease w-o-w: Spot lump premium stood at $0.1555/dmtu, decreased as against $0.2100/dmtu last week.

2. Coking coal prices rise w-o-w: In the Australian coking coal market this week, prices rose initially but became stable later on. This weekly rise in prices is attributed to the resurgence in spot demand from Asian countries. Premium HCC prices saw a rise of $10/t w-o-w. The latest price for the same was accessed at $378/t FOB Australia against $368 FOB Australia a week ago.

3. China's billet prices slump towards weekend: Steel billet prices in China's Tangshan witnessed a huge fall of RMB 340/t ($51/t) w-o-w following a steep decline in rebar futures. Prices stood at RMB 4,180/t ($622/t), inclusive of 13% VAT, on 17 June. According to data maintained with SteelMint, the Chinese SHFE rebar futures contract for October 2022 delivery closed at RMB 4,354/t ($649/t) on 17 June 2022, witnessing a sharp fall of RMB 439/t ($65/t) w-o-w.

4. HRC export offers decline w-o-w: China's HRC export offers declined by $25/t to $760/t FOB, compared with $785/t FOB a week ago. Sluggish demand in the overseas market has impacted the export offers this week.

Weak demand from end-user and drop in HRC furtures weighed on the market sentiments, pushing domestic HRC prices down by RMB 280-300/t ($42-45/t) to RMB 4,560-4,600/t ($679-685/t) eastern China, against RMB 4,860-4,880/t ($724-727/t) eastern China last week. Moreover, the resurgence of Covid cases in major steelmaking hubs have triggered towards losses in both futures and spot prices.

According to the data maintained with SteelMint, HRC futures contract for October delivery on the Shanghai Futures Exchange (SHFE) fell sharply by RMB 371/t ($55/t) w-o-w to RMB 4,501/t ($670/t) on 17 June 2022.

Moreover, World's largest steel manufacturer Baosteel has rolled over its monthly carbon flat steel prices for July 2022 sales, sources informed SteelMint. The steel producer kept prices unchanged considering subdued domestic demand amidst the resurgence of Covid-19 infections.

5. Domestic rebar prices fell by RMB 240/t ($36/t) w-o-w: China's domestic rebar prices fell by RMB 240/t ($36/t) to RMB 4,410-4,460/t ($657-664/t) northern China in comparison with RMB 4,650-4,700/t ($692-700/t) northern China in the previous week. Prices witnessed a downward trend on sluggish demand amidst adverse weather conditions, coupled with spike in Covid cases in major parts of China resulting in logistical disruptions in the northern region.