China weekly: Steel prices drop, holidays may keep sentiments bearish
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Chinese domestic steel prices dropped this week amid lacklustre demand and a decline in prices of steelmaking raw materials. Imported iron ore and coking coal prices dropped w-o-w. Supplies in the market remained stable which weighed on finished long and flat steel prices this week.
Product-wise sentiments
1. China spot iron ore prices down w-o-w: Chinese spot iron ore fines Fe 62% prices stood at $106.5/t CNF China on 28 April 2023, declining by $5.65/t w-o-w against $112.15/t CNF China last week. Iron ore spot prices in China moved down since some Chinese steelmakers announced maintenance plans and Australian supply returned to normal. Due to low stocks at mills seaborne trade increased to some extent, but the recovery is unlikely to sustain.
According to SteelHome data, iron ore inventory at major Chinese ports stood at 129.8 mnt on 20 April, down 1.9 mnt from 131.7 mnt last week.
a) Spot pellet premium stable w-o-w: The spot pellet premium for Fe 65% grade pellets was assessed at $17.9/t, down $0.5/t compared to the previous week.
b) Spot lump premium falls w-o-w: The spot lump premium stood at $0.1760/dmtu, decreasing by 0.0060 compared to last week.
2. Coking coal prices drop: Coking coal prices dropped by $25/t w-o-w to $232/t FOB from $257/t FOB last week as there was ample spot supply of the raw material whereas demand from Chinese and other Asian buyers was limited.
3. Chinese billet prices fall amid bearish market sentiments: Billet prices in China's Tangshan fell w-o-w by RMB 170/t ($24/t) to RMB 3,490/t ($505/t), including 13% VAT, on 28 April. Weak demand, volatility in rebar futures, and finished steel prices weighed on billet prices. According to data maintained with SteelMint, China's SHFE rebar futures stood at RMB 3,660/t ($529/t), down sharply by RMB 150/t ($22/t) w-o-w.
4. HRC export offers drop: China's HRC export offers dropped w-o-w by $50 to $615/t FOB Rizhao. Mills lowered prices amid subdued demand in the domestic and overseas markets and weakening SHFE HRC futures prices.
Domestic HRC prices fell RMB 110/t ($16/t) w-o-w to RMB 3,870/t ($560/t) against RMB 3,980/t ($576/t) last week. Uncertainty over the extent of production cuts and sluggish demand led to the price drop. Moreover, SHFE HRC futures (October 2023 contract) settled at RMB 3,738/t ($541/t) on 28 April against RMB 3,764/t ($545/t) on 26 April, when the contract got changed from May 2023.
5. Domestic rebar prices fall w-o-w: Chinese rebar prices fell by RMB 150/t ($22/t) to RMB 3,810/t ($551/t) as against RMB 3,960/t ($573/t) last week. SHFE rebar futures (October 2023 contract) settled lower at RMB 3,683/t ($533/t) on 28 April against RMB 3,702 ($536/t) on 26 April.
However, prices edged up by RMB 30/t since the beginning of the week as news spread that mills were planning production cuts.
Outlook: Chinese steel prices are likely to remain under pressure in the near term, with sluggish demand and falling raw material prices being the key reasons. Mills are likely to take production cuts factoring in the above scenario, market sources informed.
Chinese markets are likely to remain inactive early next week owing to the labour day holidays, and sources expect prices to remain under pressure after the market opens. However, steel production cuts remain a key factor to watch out for. The average daily crude steel output of CISA-affiliated mills stood at 2.29 mnt in mid-April, down 1.38% compared to mid-March.
