China weekly: Steel prices drop on sluggish demand, weak macroeconomic outlook

This week steel prices in China witnessed a downtrend due to sluggish demand coupled with adverse weather conditions. Steel inventory at Chinese mills in mid-June 2022 stood at 20.52 mnt, an increase of 1.97 mnt or 10.65% from the previous month, as per CISA data.

Product wise sentiments:

1. China spot iron ore prices inch up towards week close: Chinese spot iron ore fines Fe 62% prices opened at $112.35/t CNF China for the week and assessed at $115/t, CNF China towards the weekend. Seaborne iron ore prices picked on improved trading activity which lent support to seaborne iron ore prices.

According to sources, buying sentiment improved following the release of Chinese steel data, which indicated higher apparent demand for rebars.

Iron ore inventory at major Chinese ports stood at 124.40 mn t this week, decreased by 1.90 mn t as against 126.3 mn t 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 $34.55/t, down $38.15/t from last week.
Seaborne Indian pellet premiums fell again amid negative steel margins.

b) Spot lump premium decrease w-o-w: Spot lump premium stood at $0.0935/dmtu, down $0.1555/dmtu over last week.

A majority of market participants continued to see lump premiums falling amid poor direct feed demand amidst weak margin environment.

2. Coking coal prices fall w-o-w: Australian coking coal prices fell $28/t w-o-w due to low buying interest on weak steel prices. The latest price on 25 June 2022 was assessed at $350/t FOB Australia as against $378/t FOB last week.

3. China's billet prices slump towards weekend: Steel billet prices in China's Tangshan witnessed a sharp fall of RMB 280/t ($42/t) w-o-w following a steep decline in rebar futures. Prices stood at RMB 3,900/t ($583/t), inclusive of 13% VAT, on 25 June. The volatility in China's SHFE rebar futures has also pulled down prices. According to data maintained with SteelMint, the Chinese SHFE rebar futures contract for October 2022 delivery closed at RMB 4,189/t ($626/t) on 24 June 2022, witnessing a sharp fall of RMB 165/t ($25/t) w-o-w.

4. HRC export offers plunge w-o-w: China's HRC (SS400) export offers plunged $65/t to $695/t FOB, compared with $760/t FOB a week ago. Competitive offers from other exporting nations and buyers sticking to side lines over volatility in the futures market continued to weigh on the export offers. It is to be noted that the current Chinese HRC export offers are over one-and-a-half year low, just below $710/t FOB assessed in mid-December 2020.

In the domestic market, HRC prices dropped by RMB 260-280/t ($39-42/t) w-o-w to RMB 4,300-4,320/t ($642-645/t) eastern China, compared with RMB 4,560-4,600/t ($681-687/t) eastern China last week. Subdued demand and declining SHFE HRC futures kept weighing on the market prices during the week.

For instance, HRC futures contract for October delivery on the Shanghai Futures Exchange (SHFE) registered a decline of RMB 251/t ($37/t) w-o-w to RMB 4,265/t ($637/t) on 24 June'22.

5. Domestic rebar falls RMB 310/t ($46/t) w-o-w : China's domestic rebar prices fell sharply by RMB 310/t ($46/t) to RMB 4,100-4,150/t ($612-620/t) northern China in comparison with RMB 4,410-4,460/t ($658-666/t) northern China in the previous week. Prices fell on the back of weak demand due to rainy season.

6. Shagang Steel lowers long steel prices: China's Shagang Steel has reduced long steel products prices for end-June sales.

Effective prices:

• Rebar (16-25 mm): RMB 5,050/t ($754/t), down RMB 300/t ($45/t)
  
  
• Wire rods (6-10 mm): RMB 5,110/t ($763/t), down RMB 200/t ($30/t)
  
  
• Coiled rebar (8-10 mm): RMB 5,200/t ($777/t), down RMB 200/t ($30/t)
  
  

All prices are on ex-mill basis, including VAT.

7. Shagang Steel reduces scrap prices: China's Shagang Steel has lowered scrap prices by RMB 100/t ($15/t) for all grades with effect from 23 Jun'22. Post revision, prices of HMS (6-10mm) stand at RMB 3,400/t ($508/t) delivered to headquarters, including 13% VAT.