China weekly: Steel prices decrease amid decline in SHFE futures

• SHFE futures show downward trend
  
  
• Chinese HRC export offers fall
  
  

China's steel prices declined for the week following the fall in SHFE futures. Domestic prices of HRC, rebar, iron ore, billets and coking coal showed a downward trend.

China's crude steel production rose by 8.1% m-o-m to 92.86 million tonnes (mnt) in May 2024 as compared to 85.94 mnt in April 2024. Moreover, the same edged up by 2.7% y-o-y as compared to 90.4 mnt in May 2023. Whereas, the same decreased by 1.4% during January-May 2024 reaching 438.61 mnt compared to approximately 444.8 mnt in January-May 2023.

1. Iron ore spot prices fall by $3/t w-o-w: The benchmark iron ore fines price dropped w-o-w by $3/t to $105/ t CFR China on 21 June 2024 reflecting ongoing low demand and a dim outlook for downstream demand. The market fundamentals are weak overall, marked by low demand and cautious procurement practices. Steel mills were facing deteriorating margins, prompting them to maintain low inventory levels and reduce their iron ore demand.

Iron ore inventory at major Chinese ports increased by 0.35 mnt to 146.95 mnt on 20 Jun compared to last week according to SteelHome data.

a) Spot pellet premium rise w-o-w: Spot pellet premium for Fe 65% grade pellets increased by $ 1.3/t w-o-w at $14.95/t CFR China on 19 June.

b) Spot lump premium down w-o-w: Spot lump premium decreased by 0.0065 at $0.2035/dmtu on 21 June.

2.Coking coal prices decreased w-o-w: Coking coal prices fell by 7% w-o-w to $239/t FOB on 21st June 2024. The prices fell on sufficient July loading cargoes and trades being concluded at lower levels.

3.China's steel billet prices fall w-o-w: Billet prices in Tangshan fell by RMB 60/t ($8/t) w-o-w to RMB 3,340/t ($460/t) on 21 June, 2024. Prices include 13% VAT. Lower trades along with volatile rebar futures, raw material and finished steel prices have weighed on billet prices. Meanwhile, market participants await July's economic meetings in order to gain clarity. SHFE rebar futures (October, 2024 delivery) decreased by RMB 74/t ($10/t) w-o-w to RMB 3,563/t ($491/t) on 21 June, 2024.

4.HRC prices edge down by $3/t: Chinese HRC prices edged down by RMB 20/t ($3/t) w-o-w to RMB 3,730/t ($514/t) for the week against RMB 3,750/t ($516/t), a week ago following the downtrend in HRC SHFE futures. HRC SHFE futures (October contract) fell by RMB 33/t ($5/t) w-o-w to RMB 3,771/t ($519/t) as compared to RMB 3,804/t ($524/t) last week. Moreover, HRC export offers decreased by $5/t w-o-w to $520/t as compared to $525/t previous week.

5.Rebar offers decrease by $4/t: China's rebar offers inched down by RMB 30/t ($4/t) w-o-w to RMB 3,670/t ($505/t) against RMB 3,700/t ($510/t) in the previous week, with fall in rebar SHFE futures. Rebar SHFE futures (October contract) fell by RMB 54/t ($7/t) w-o-w to RMB 3,586/t ($494/t) as compared to RMB 3,640/t ($501/t), a week ago.

China's rebar production stood at 83.98 mnt in Jan-May'24, down 12.6% y-o-y, according to the National Bureau of Statistics (NBS). Moreover, in May, the same dropped by 8.9% y-o-y to 17.986 mnt.

China's Shagang Steel has decreased long steel prices by RMB 100/t ($14/t) for late-Jun'24 sales. Effective prices:

• Rebar (16-25 mm): RMB 3,970/t ($547/t)
  
  
• Wire rod (6-10 mm): RMB 3,920/t ($540/t)
  
  
• Coiled rebar (8-10 mm): RMB 4,010/t ($552/t)
  
  
• All prices are ex-mill, including VAT.
  
  

Outlook

China's steel industry faces downtrend as demand particularly in construction sector, is likely to remain subdued. This weak, demand, coupled with high stockpiles amid falling raw material costs, are expected to keep steel prices under pressure.

However, China's National Development and Reform Commission (NDRC) requires all provinces to set and submit plans to reduce production. Companies with poor environmental records during winter might face significant cuts over 50%, keeping the outlook mixed.