China weekly: Steel prices fall w-o-w on decline in SHFE futures

• Iron ore spot prices decline by $6/t w-o-w
  
  
• HRC prices down, but Bao holds Dec offers
  
  

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 coking coal, also decreased.

The average daily crude steel output of CISA-affiliated mills stood at 2.096 million tonnes (mnt) in early-November 2024, an increase of 0.1% compared to 2.093 mnt in late-October 2024. CISA has reported that total steel inventory at key enterprises reached 13.66 mnt in early-November 2024. This represents an increase of 20,000 tonnes (t) or 0.1% from 13.64 mnt in late-October 2024.

China's crude steel production in October 2024 stood at 81.88 mnt, reflecting a 2.9% rise compared to 79.09 mnt in October 2023. Moreover, the same increased by 6% m-o-m as against 77.07 mnt a month ago.

1. Iron ore spot prices fall sharp $6/t w-o-w: The benchmark iron ore fines price declined by $6/t w-o-w to $97/t CFR China on 15 November 2024 amid continued thin liquidity in the seaborne market. Weak downstream steel demand pulled down buying interest. Additionally, the recent depreciation of the USD/CNY exchange rate has raised the cost of seaborne cargo for Chinese buyers, narrowing landing margins and reducing purchasing activities. Despite a rebound in pig iron production, off-season sluggishness and forex fluctuations dampened seaborne cargo interest. Higher iron ore inventories at ports weighed on seaborne sales, to save on import margins.

Iron ore inventories at China's major ports decreased by 1.6 mnt to 148.3 mnt on 14 November compared to last week, according to SteelHome data.

a) Spot pellet premium rises w-o-w: Spot premium for the Fe65% grade pellet increased by $0.5/t w-o-w to $16.85/t CFR China on 13 November.

b) Spot lump premium drops w-o-w: The spot lump premium dipped by $0.004/t to $0.1310/dmtu on 15 November.

2. Coking coal prices edge down: Coking coal prices edged down on a weekly basis to $206/t FOB Australia. Buyers mostly decided to stay on the sidelines, awaiting price clarity.

3. Billet prices fall w-o-w amid falling futures: Billet prices in Tangshan fell by RMB 40/t ($6/t) to RMB 3,080/t ($426/t) on 15 Novembere against 8 November. Prices include 13% VAT. Rising port stockpiles, weak market fundamentals, declining raw materials and finished steel prices and rebar futures have weighed on billet prices throughout the week. Meanwhile, SHFE rebar futures (January, 2025 delivery) decreased sharply by INR 135/t ($19/t) to stand at RMB 3,232/t ($447/t) on 15 November against 8 November

4. Domestic HRC prices fall w-o-w: Chinese HRC offers fell by RMB 60/t ($8/t) w-o-w to RMB 3,440/t ($476/t) as compared to RMB 3,500/t ($484/t) a week ago following the decline in SHFE futures. SHFE HRC futures (January 2025 contract) dropped by RMB 119/t ($16/t) w-o-w to RMB 3,459/t ($478/t) against 3,578/t ($495/t) in the previous week.

China's export offers decreased by $15/t w-o-w $495/t from $510/t last week. This decline in offers is attributed to competitive offers from other regions.

However, world's top steelmaker, Baosteel, has kept HRC prices stable for December sales, after increasing tags by $71/t in November.

5. Domestic rebar prices drop w-o-w: China's rebar offers declined by RMB 200/t ($28/t) w-o-w to RMB 3,240/t ($448/t) against RMB 3,440/t ($476/t) in the previous week, following the downtrend in SHFE futures. SHFE rebar futures dropped by RMB 133/t ($18/t) w-o-w to RMB 3,278/t ($453/t) as compared to RMB 3,411/t ($472/t) a week ago.

China's Shagang Steel has kept its long steel products' prices unchanged for mid-November sales. Prices of rebars, coiled rebars, and wire rods were stable w-o-w. Effective prices stood at:

• Rebar (16-25 mm): RMB 3,850/t ($536/t)
  
  
• Coiled rebar (8-10 mm): RMB 3,860/t ($537/t)
  
  
• Wire rod (6-10 mm): RMB 3,770/t ($525/t)
  
  

Outlook

The Chinese steel industry is expected to experience weakening demand in the short term primarily driven by seasonal fluctuations and economic uncertainty, leading to price volatility. However, the future trajectory of the industry will depend on global economic conditions, government policies, and potential infrastructure projects.