China weekly: Steel prices exhibit mixed trends amid volatile futures

• Iron ore spot prices edge down $2/t w-o-w
  
  
• HRC export offers decline by $10/t w-o-w
  
  

China's steel market exhibited mixed trends this week, influenced by fluctuations in Shanghai Futures Exchange (SHFE) prices. Rebar prices recorded a w-o-w increase, whereas hot-rolled coil (HRC) prices declined. Billet prices remained steady w-o-w. In the raw materials segment, spot iron ore and coking coal prices both decreased on a weekly basis.

Furthermore, the China Iron and Steel Association (CISA) reported that total steel inventory at key enterprises reached 14.64 million tonnes (mnt) in mid-December 2024. This represents an increase of 460,000 tonnes (t) or 3.2% from 14.180 mnt in early-December 2024. However, inventory levels went down by 910,000 t or 5.9% m-o-m against 15.55 mnt in mid-November.

1. Iron ore spot prices decrease by $2/t w-o-w: The benchmark iron ore fines price fell by $2/t w-o-w to $99/t CFR China on 27 December 2024 amid rumours of production cuts at steel mills following maintenance periods, which dampened market sentiment despite no official announcements. Additionally, the narrowing discounts and potential supply disruptions failed to spur significant demand, while the market focus shifted to February cargoes and post-holiday restocking. Weakening fundamentals, such as potential increases in blast furnace maintenance and softer pig iron production outlooks, further pressured demand for raw materials. Combined with slower trading activity and cautious purchasing behaviour from end-users, these factors collectively drove the decline in prices.

Iron ore inventories at China's major ports decreased by 0.95 million tonnes (mnt) w-o-w to 146.85 mnt on 26 December, according to SteelHome data.

a) Spot pellet premium inches up w-o-w: Spot pellet premium for Fe 65% grade pellet increased by $0.2/t w-o-w to $17.85/t CFR China on 24 December.

b) Spot lump premium edges up w-o-w: Spot lump premium rose by $0.004/t to $0.1380/dmtu on 26 December.

2. Coking coal prices decline w-o-w: Australian coking coal prices declined by over $8/t w-o-w. PHCC was assessed at $188/t FoB Australia. Limited buying interest and acceptance of 5th round of met coke price cut kept prices under pressure.

3. Chinese billet prices remain stable w-o-w: Billet prices in China's Tangshan remained unchanged w-o-w at RMB 3,040/t ($417/t), including 13% VAT, on 27 December, 2024. Weak market demand, lack of encouragement from the policy front and declining trends in rebar futures and finished steel prices have collectively exerted downward pressure on billet prices.

4. Domestic HRC prices down w-o-w: Chinese HRC offers edged down by RMB 10/t ($1/t) w-o-w to RMB 3,400/t ($466/t) as compared to RMB 3,410/t ($467/t) a week ago following the volatility in SHFE futures. SHFE HRC futures (May 2025 contract) went up by RMB 18/t ($3/t) w-o-w to RMB 3,433/t ($470/t) against 3,415/t ($468/t) in the previous week.

China's export offers decreased by $10/t w-o-w $480/t from $490/t last week. This decline in offers is attributed to competitive offers from other regions.

5. Domestic rebar prices inches up w-o-w: China's rebar offers inched up by RMB 10/t ($1/t) w-o-w to RMB 3,320/t ($455/t) against RMB 3,310/t ($454/t) in the previous week, following the uptrend in SHFE futures. SHFE rebar futures rose by RMB 27/t ($4/t) w-o-w to RMB 3,310/t ($454/t) as compared to RMB 3,283/t ($450/t) a week ago.

Furthermore, Shagang Steel has kept prices of its long steel products - rebars, coiled rebars, and wire rods - unchanged for late-December sales. Notably, the company rolled over prices in its mid-December revision as well. Effective prices now stand at:

• Rebar (16-25 mm): RMB 3,700/t ($507/t)
  
  
• Coiled rebar (8-10 mm): RMB 3,710/t ($508/t)
  
  
• Wire rod (6-10 mm): RMB 3,620/t ($496/t)
  
  

Outlook

The China's steel industry is likely to remain volatile in the near term. The government might introduce new policies to boost the economy, which could increase demand for steel. However, it is unclear if this will work, especially since the global economy is slowing down. Additionally, steel demand usually slows down during winter, which could lead to more challenges for the industry.