China weekly: Steel prices drop w-o-w on declining SHFE futures

• Iron ore spot prices down $4/t w-o-w
  
  
• HRC export offers drop $5/t w-o-w
  
  

The Chinese steel market faced a significant decline, following the downward trajectory of Shanghai Futures Exchange (SHFE) prices. Domestic steel products, including billets, hot-rolled coils (HRC), and rebars, witnessed w-o-w price drops. Additionally, prices of key raw materials like iron ore and coaking coal, also decreased.

In addition, the average daily crude steel output of CISA-affiliated mills stood at 2.024 mnt in early-December, a decrease of 3.2% compared with 2.091 mnt in late-November 2024. Moreover, output edged down by 3.4% m-o-m from 2.096 mnt in early-November.

1. Iron ore spot prices decrease by $4/t w-o-w: The benchmark iron ore fines price fell by $4/t w-o-w to $101/t CFR China on 20 December 2024 amid lack of improvement in market fundamentals, as reflected in the ongoing weak demand. In China, rebar destocking has improved this week, mainly due to low production rather than stronger demand. Meanwhile, the US dollar strengthened after the Federal Reserve cut interest rates by 25 basis points to 4.25%-4.5% on 18 Dec, signalling potential further cuts in CY'25.

Iron ore inventories at China's major ports decreased by 0.35 million tonnes (mnt) to 147.8 mnt on 19 December November compared to last week, according to SteelHome data.

a) Spot pellet premium inches down: Spot pellet premium for Fe 65% grade pellet decreased by $0.15/t w-o-w to $17.65/t CFR China on 18 December.

b) Spot lump premium edges down: Spot lump premium dipped by $0.001/t to $0.1340/dmtu on 20 December.

2. Coking coal prices decline w-o-w: Australian coking coal prices declined towards weekend after remaining stable throughout the week. PHCC was assessed at $196.5/t FoB Australia. Weaker buying interests and discussions of fifth round of met coke price cut have weighed on coking coal prices.

3. Chinese billet prices decrease by RMB 60/t (8/t) w-o-w: Billet prices in China's Tangshan fell by RMB 60/t ($8/t) w-o-w to RMB 3,040/t ($417/t), including 13% VAT, on 20 December. Weak demand, coupled with rising port inventories and declining raw material and finished steel prices, has driven billet prices lower.

4. Domestic HRC prices fall w-o-w: Chinese HRC offers fell by RMB 60/t ($8/t) w-o-w to RMB 3,410/t ($467/t) as compared to RMB 3,470/t ($476/t) a week ago following the decline in SHFE futures. SHFE HRC futures (May 2025 contract) dropped by RMB 90/t ($12/t) w-o-w to RMB 3,415/t ($468/t) against 3,505/t ($480/t) in the previous week.

China's export offers decreased by $5/t w-o-w $490/t from $495/t last week. This decline in offers is attributed to competitive offers from other regions. However, Steel exports volumes have already crossed 100 mnt by November 2025 and will end the calendar with a flourish.

5. Domestic rebar prices drop w-o-w: China's rebar offers declined by RMB 60/t ($8/t) w-o-w to RMB 3,310/t ($454/t) against RMB 3,370/t ($462/t) in the previous week, following the downtrend in SHFE futures. SHFE rebar futures dropped by RMB 94/t ($13/t) w-o-w to RMB 3,283/t ($450/t) as compared to RMB 3,377/t ($463/t) a week ago.

China's construction steel demand is expected to decline rapidly this month due to winter's impact on northern China and preparations for the Chinese New Year. Construction companies are halting operations and refraining from stockpiling to minimize risk.

Outlook

China's steel market is poised for further decline due to seasonal factors, Chinese New Year preparations, and softening demand. The short-to-medium term looks bleak as China enters the peak winter season when construction traditionally takes a hit, dragging down steel consumption with it.