China weekly: Steel prices decline on weak demand

This week the domestic steel market prices in China declined and were mostly impacted by low demand for finished steel products amid bad weather conditions and anticipation of improved supplies with the lifting up of lockdown from the steel hub of Tangshan. Moreover, volatility in futures market and a steep increase in coking coal prices weighed on the market sentiments.

Product-wise sentiments:

1. Chinese spot iron ore fines price remain volatile: Iron ore Fe 62% prices opened at $151/t CNF China for the week and were assessed at $153/t CNF towards the weekend after rising to $155/t levels. Liquidity in seaborne market improved a bit. Tangshan lifted steelmaking restrictions imposed to fight the COVID-19 surge earlier this week which improved raw material deliveries to the steel mills. Also, with margins of steel mills getting squeezed, enquiries for low-grade iron ore have gained momentum in China. Iron ore inventory at major Chinese ports inched down to 154.9 mnt on 7 April, 2022 compared to 155.6 mnt last week, as per SteelHome data.

a) Spot pellet premium down w-o-w: Spot pellet premium for Fe 65% grade pellets was assessed at $53.30/t, up from $49.7/t last week.

b) Spot lump premium stable w-o-w: Spot lump premium stood at $0.3118/dmtu, stable as against last week. However, the short-term demand outlook for lump is poor due to resilient coke prices and better cost-effectiveness of portside imported pellets, several sources said.

2. Coking coal prices rise steeply by $102/t w-o-w: This week, the Australian premium HCC price has moved up by $102/t and touched $506/t FOB basis. The prices increased amid EU's ban on Russian imports and improved demand. However, towards the end of the week buyers sidelined and adopted a wait and watch mode.

3. China's billet prices edge down towards weekend: Steel billet prices in China's Tangshan witnessed a decrease of RMB 20/t ($3/t) w-o-w. Prices stood at RMB 4,810/t ($755/t), inclusive of 13% VAT, on 15 April. According to data maintained with SteelMint, China's rebar futures contract for October, 2022 delivery on the Shanghai Futures Exchange (SHFE) closed at RMB 5,049/t ($792/t) on 15 April, 2022, a marginal increase of RMB 30/t ($5/t), w-o-w.

4. HRC export offers rise by $15/t: Chinese mills are offering HRCs for export at $930-940/t FOB, up by $15/t on the week. Logistical hurdles and a subsequent increase in delivery lead time from mills to sea port have resulted in the price hike, despite weak demand in overseas markets. Moreover, China's HRC futures contract for October, 2022 delivery on the Shanghai Futures Exchange (SHFE) closed at RMB 5,181/t ($813/t) on 16 April, up by RMB 31/t ($5/t) against RMB 5,150/t ($808/t), a week ago, according to data maintained with SteelMint.

In the domestic market, HRC was traded at RMB 5,150-5,180/t eastern China ($808-813/t), widening downwards compared to RMB 5,160-5,180/t ($810-813/t) eastern China, a week ago. Anticipation of improved supplies in upcoming days with the lifting of lockdown in Tangshan province, while a few major cities still in lockdown weighed on the market demand.

5. Rebar prices fall on dull demand: China's domestic rebar prices were down by RMB 70/t ($11/t) to RMB 5,000-5,030/t ($785-789/t) northern China as against RMB 5,070-5,100/t ($796-800/t) northern China in the preceding week. Heavy rainfall in eastern China, coupled with loss in futures, kept demand subdued this week.