China weekly: Steel prices fall on weak market outlook
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Chinese steel prices fell this week amid supply-demand imbalance. Daily crude steel output among member mills of the China Iron & Steel Association (CISA) during the first 10 days of April increased further to hit an 11-month high of 2.32 million tonnes/day. In addition, adverse weather conditions in some parts of China resulted in bearish market sentiments.
Product-wise sentiments-
1. China spot iron ore prices edge down w-o-w: Chinese spot iron ore fines Fe 62% prices stood at $118.9/t CNF China on 14 April 2023, inching down by $0.7/t w-o-w, against $119.6/t CNF China in the previous week. Iron ore market players have been on edge due to the unpredictable weather in Western Australia. Cyclone Ilsa is predicted to disrupt operations and vessel shipments, although having little effect on seaborne pricingPort stocks fell to nearly a half-year low, although demand weakened owing to sluggish steel trade and planned production cuts by Chinese steelmakers. However, demand for fines is expected to remain robust in Q2.
According to SteelHome data, iron ore inventory at major Chinese ports stood at 133.3 million tonnes on 13 April, 2023, which decreased by 1.2 million tonnes from 134.5 million tonnes the previous week.
a) Spot pellet premium stable w-o-w: Spot pellet premium for Fe 65% grade pellets was assessed at $18.7/t, and remained stable compared to the previous week.
b) Spot lump premium increase w-o-w: Spot lump premium stood at $0.1820/dmtu, rose by 0.0270 as against $0.1550/dmtu last week.
2. Coking coal prices drop: Coking coal prices dropped by $17/t w-o-w to $275/t FOB from $292/t FOB amid weak buying interest. Market sentiment remained unchanged as there was limited procurement from Indian and Chinese buyers.
3. Chinese billet prices decline fall w-o-w: Billet prices in China's Tangshan fell w-o-w by RMB 60/t ($9/t) to RMB 3,740/t ($544/t), including 13% VAT, on 14 April. Volatility in rebar futures and finished steel prices have weighed on billet prices.
4. HRC export offers drop w-o-w: China's HRC export offers dropped by $15/t w-o-w to $665/t FOB Rizhao against $680/t a week ago. Mills lowered their prices amid decline in both domestic and overseas demand. Moreover, SHFE HRC future (May contract) fell by RMB 41/t ($6/t) to RMB 3998/t ($582/t) on 14 April against RMB 4039/t ($588/t) a week ago.
Domestic HRC prices decreased by RMB 40/t ($6/t) w-o-w to RMB 4,070/t ($592/t) against RMB 4,110/t ($598/t) in the preceding week. Market participants showed concern over weaker than expected demand which is contributing to decline in futures.
In addition, world's top steel manufacturer Baosteel, has rolled over HRC prices m-o-m for May'23 sales. The company has kept prices flat due to subdued domestic demand. Prior to this, the company has raised prices for four consecutive months.
5. Domestic rebar prices fall: Chinese rebar prices fell by RMB 70/t ($10/t) to RMB 4,040/t ($588/t) as against RMB 4,110/t ($598/t) last week. Construction works in northern region of China was suspended following adverse weather condition. Furthermore, heavy rainfall in central and southern region of the country lowered construction activities resulting weaker demand and prices.
6. China's Shagang Steel lowered long steel prices: Shagang Steel has lowered rebar prices by RMB 100/t ($15/t) and wire rod prices by RMB 150/t ($22/t) for mid-Apr'23 sales. Effective prices-
- Rebars (16-25 mm): RMB 4,350/t ($633/t)
- Wire rods (6-10 mm): RMB 4,410/t ($642/t)
- Coiled rebars (8-10 mm): RMB 4,550/t ($662/t)
- All prices are ex-mill, including VAT.
Outlook: Owing to falling steel prices, steel mills are already facing the pressure of significant losses, prompting small-sized steel mills to reduce production, and the short-term supply side may get impacted. From the demand side, as the release of downstream terminal demand is restricted by various factors as there is pressure to pick up the inventory in steel mills in the short term. Thus, it will be interesting to see if prices will rebound next week, amidst unconfirmed production cuts.
