China weekly: Steel prices drop w-o-w amid uncertain market outlook

• Iron ore spot prices stable w-o-w
  
  
• HRC export offers drop $5/t w-o-w
  
  

China's steel market trended downward this week, driven by uncertain conditions and sluggish demand. Domestic steel prices, particularly for billets, rebar, and hot-rolled coils (HRCs), declined due to weak buying sentiment in the finished steel market and volatility in futures trends.

1. Iron ore spot prices remain stable w-o-w: The benchmark iron ore fines price remained stable w-o-w at $99/t CFR China on 3 January 2024 amid subdued trading activity. As per reports, a notable decline in daily hot metal production and squeezed steel margins have pressured prices, reflecting the impact of blast furnace maintenance shutdowns. Additionally, market sentiment remains cautious despite reports of potential interest rate cuts by China's central bank, as the lack of a specific timeline has limited any immediate positive influence.

Iron ore inventories at China's major ports decreased by 2.25 million tonnes (mnt) w-o-w to 144.6 mnt on 2 January, according to SteelHome data.

a) Spot pellet premium stable: Spot pellet premium for Fe 65% grade pellet remained stable at $17.85/t CFR China on 31 December.

b) Spot lump premium edges up w-o-w: Spot lump premium rose by $0.011/t to $0.1490/dmtu on 3 January.

2. Coking coal prices rise w-o-w: Australian coking coal prices rose by over $10/t w-o-w. PHCC was assessed at $199/t FoB Australia. There were limited offers from miners in Australia for January-February as they expected a demand pick-up from India in Q1CY'25, which also supported the price hike.

3. Chinese billet prices fall by RMB 30/t ($4/t) w-o-w: Billet prices in China's Tangshan fell by RMB 30/t ($4/t) w-o-w to RMB 3,010/t ($411/t), including 13% VAT, on 3 January 2025. Rising inventory levels amid weak buying interest along with sluggish sentiments in the finished steel market continue to weigh on billet prices.

4. Domestic HRC prices fall w-o-w: Chinese HRC offers fell by RMB 30/t ($4/t) w-o-w to RMB 3,370/t ($461/t) as compared to RMB 3,400/t ($465/t) a week ago following the decline in SHFE futures and weak demand for finished steel in the domestic market. SHFE HRC futures (May 2025 contract) dropped by RMB 23/t ($3/t) w-o-w to RMB 3,391/t ($463/t) against 3,414/t ($467/t) in the previous week.

China's export offers decreased by $5/t w-o-w to $475/t from $480/t last week amid global uncertainty and weak holiday-season demand.

5. Domestic rebar prices edge down w-o-w: China's rebar offers edged down by RMB 10/t ($1/t) w-o-w to RMB 3,310/t ($452/t) against RMB 3,320/t ($454/t) in the previous week, following the volatility in SHFE rebar futures. SHFE rebar futures remained marginally stable w-o-w at RMB 3,281/t ($448/t). China's construction steel demand declined due to winter's impact on northern China and Chinese New Year. Moreover, construction companies are halting operations and refraining from stockpiling to minimise risk.

In addition, Shagang Steel has reduced its long steel product prices for early-January 2025 sales after keeping them stable in late-December 2024. Prices of rebars, coiled rebars, and wire rods dropped by RMB 100/t ($14/t). Effective prices are as follows:

• Rebar (16-25 mm): RMB 3,600/t ($493/t)
  
  
• Coiled rebar (8-10 mm): RMB 3,610/t ($495/t)
  
  
• Wire rod (6-10 mm): RMB 3,520/t ($482/t)
  
  

Outlook

China's steel market is likely to remain under pressure in January, with limited upside momentum. Neither supply nor sentiment factors are expected to provide significant support to boost the market. However, the industry is awaiting potential positive macro-economic policies or stimulus measures from the central government, which could help lift sentiments.