China weekly: Steel prices down w-o-w on dull demand amid Covid outbreak

This week, Chinese steel prices witnessed a downward trend across product categories in Beijing and Shanghai because of Covid. As per the municipal health commission in China, 70 confirmed cases of Covid-19 were registered between 22-24 April in Beijing.

Product-wise sentiments

1. China spot iron ore prices increase: Chinese spot iron ore fines Fe 62% prices opened at $138.95/t CNF China for the week and were assessed at $142.35/t, CNF China towards the weekend. Asian iron ore prices rose due to improved buying interest. Logistical constraints and a reduction in buying activities as a result of China's lockdown had weighed on prices at the beginning of this week. Later, iron ore prices rose as the Chinese market eased into the Labour Day holidays.

At portside, trading volumes were limited as steel mills were almost done with pre-holiday restocking, sources said. Portside offers and bids were heard higher on the day, but there were fewer deals.

Iron ore inventory at major Chinese ports stood at 148.6 million tonnes (mnt) this week, inching down by 4.3 mnt as against 152.9 mnt a week ago, as per data maintained by SteelHome.

a) Spot pellet premium down w-o-w: Spot pellet premium for Fe 65% grade pellets was assessed at $44.8/t, moving down against $48/t last week.

b) Spot lump premium down w-o-w: Spot lump premium stood at $0.3075/dmtu, down as against $0.3100/dmtu last week.
Seaborne lump premiums dipped as a majority of sources saw the lump premiums being unsustainable at current steel margins.

2. Coking coal prices rise this week: Seaborne coking coal price increased by $69/t w-o-w amid strong restocking demand. The latest prices for the premium HCC grade is assessed at around $518/tonne (t) FOB Australia against $449/t FOB in the previous week.

3. China's billets prices fall towards weekend: Steel billets prices in China's Tangshan witnessed a fall of RMB 50/t ($7/t) w-o-w. Prices stood at RMB 4,740/t ($717/t), inclusive of 13% VAT, on 29 April 2022. According to data maintained with SteelMint, China's rebar futures contract for October 2022 delivery on SHFE was closed on 29 April 2022 at RMB 4,910/t ($745/t), a fall of RMB 54/t ($8/t) w-o-w. However, the same witnessed a rise of RMB 60/t ($9/t), d-o-d.

4. HRC export offers down $50/t w-o-w: Chinese mills are offering HRCs lower at $850/t FOB China as against $900/t FOB a week ago. Market participants adopted wait-and-watch mode on bid-offer disparities. Moreover, the recent spike in Covid cases and the depreciation of th RMB against dollar kept demand for Chinese HRCs low.

In the domestic market, HRC prices stood at RMB 4,980-5,000/t ($754-757/t) eastern China, down by RMB 130-140/t ($20-21/t) in comparison with RMB 5,120-5,130/t ($775-776/t) eastern China, a week ago.

Recent developments in China:

• In the recent announcement, China's central bank decided to cut the reserve requirement ratio (RRR) for foreign deposits by 1% point to 8% from 15 May. This move, in turn, triggered SHFE ferrous futures market during the week.
  
  
• Low consumption, too, weighed upside on steel futures. For instance, HRC output across China stood at 3.24 mnt in the week, while, inventories held by traders aggregated to 3.41 mnt during the same week.
  
  

5. Domestic rebar prices down by RMB 110/t w-o-w: Bearish sentiments have pushed China's domestic rebar prices down by RMB 100-120/t ($15-18/t) to RMB 4,960-5,000/t ($751-757/t) northern China as against RMB 5,080-5,100/t ($769-772/t) northern China last week.

China's recent removal of import duties on coking coal and thermal coal, in a bid to stabilise energy supply, resulted in fall in rebar prices. Market participants opine that cheaper raw material will also lower production costs and thereby result in decline in finished steel prices. Also, demand for rebar in several regions remained flat amid rainy weather.