China weekly: Steel prices decline amid weak demand, falling futures

Chinese steel prices witnessed a downtrend this week amid weak demand and falling futures. Steel inventory at key Chinese mills stood at 16.94 mnt in late-June, a m-o-m decrease of 17.42%, as per China Iron and Steel Association (CISA) data. The average daily crude steel output of CISA-affiliated mills was recorded at 2.09 mnt in late-June, down by 7% m-o-m.

Product wise sentiments-

1. China spot iron ore prices inch down: Chinese spot iron ore fines Fe 62% prices opened at $114.3/t CNF China for the week and assessed at $114.05/t, CNF China towards the weekend. Seaborne iron ore prices dipped towards the beginning of the week as buyers were on the sidelines amid market volatility. Later, iron ore prices rose due to improved trading activity and amid the news about the government stimulus policies aimed at improving China's economy.

According to sources, even though steel margins improved slightly, prices were still under pressure as a result of weak demand.

Iron ore inventory at major Chinese ports stood at 128.3 mnt this week, increasing by 2.8 mnt as against 125.5 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 $29.65/t, inching up against $29.6/t last week.

b) Spot lump premium stable w-o-w: Spot lump premium was stable at $0.1000/dmtu against last week.

2. Coking coal prices fall w-o-w: Coking coal prices fell by $44/t w-o-w. The price on 8 July was $258/t FOB Australia against $302/t FOB Australia a week ago. The fall is due to weak steel demand as manufacturers were making need-based purchases and waiting for some stability in prices.

3. China's billet prices fall towards weekend: Steel billet prices in China's Tangshan witnessed a significant fall of RMB 80/t ($12/t) w-o-w following a decline in rebar futures. Prices stood at RMB 3,920/t ($585/t), inclusive of 13% VAT, on 9 July. According to data maintained with SteelMint, the Chinese SHFE rebar futures contract for October 2022 delivery closed at RMB 4,196/t ($626/t) on 8 July, witnessing a significant fall of RMB 69/t ($10/t), w-o-w.

4. HRC export offers drop $15/t w-o-w: China's HRC (SS400) export offers dropped $15/t w-o-w to $660/t FOB compared with $675/t FOB a week ago.

Dull demand weighed on the market sentiments dragging domestic HRC prices down by RMB 140/t ($21/t) to RMB 4,160/t ($621/t) northern China as against RMB 4,300/t ($642/t) a week ago. Moreover, traders adopted a wait-and-watch mode owing to supply-demand mismatch and falling HRC futures.

According to data maintained with SteelMint, SHFE HRC futures contract for October delivery dropped by RMB 173/t ($26/t) w-o-w to RMB 4,177/t ($624/t) on 8 July.

In addition, China's HRC stocks rose 2% w-o-w to 2.67 mnt as on 8 July, compared with 2.61 mnt a week ago, as per Lange Steel data.

5. Domestic rebar prices decline w-o-w: China's domestic rebar prices fell by RMB 90/t ($13/t) to RMB 4,210/t ($629/t) in western China compared with RMB 4,300/t ($642/t) in the previous week. Prices fell despite a slight improvement in demand and destocking activities by traders resulting in a decline in construction steel inventory.

6. Shagang Steel cuts scrap prices: China's Shagang Steel lowered scrap prices by RMB 50/t ($7/t) for all grades with effect from 6 July. Post revision, prices of HMS (6-10mm) stand at RMB 3,300/t ($493/t) delivered to headquarters, including 13% VAT.