China weekly: Steel prices increase sharply w-o-w on improved demand

Steel prices in China saw a noticeable increase this week on the back of improved domestic demand and sharp gains in futures. Moreover, demand for Chinese steel revived in the overseas market amidst the Russia-Ukraine crisis.

Product-wise sentiments

1. China spot iron ore prices up sharply:?Chinese spot iron ore fines Fe 62% prices opened at $139.10/t CNF China for the week and assessed at $152.4/t, CNF China towards the weekend. Seaborne iron ore prices rose though Chinese buyers remained on the side-lines.

Despite limited interest for seaborne cargoes from the Chinese market, iron ore prices rose as concerns over supplies were increasing with intensifying Russia-Ukraine conflict.

Iron ore inventory at major Chinese ports stood at 160 mnt this week, inching down by 0.95 mnt as against 160.95 mnt a week ago, as per data maintained by SteelHome.

a) Spot pellet premium up w-o-w: Spot pellet premium for Fe 65% grade pellets was assessed at $58.45/t, up against $54.2/t last week. Seaborne Indian pellet premiums strengthened this week as procurement from European buyers increased.

b) Spot lump premium increases w-o-w: Spot lump premium stood at $0.3750 as against $0.3525/dmtu, last week. Even though lump demand at port seems to be normal, inventories are tighter now which kept prices high, a Chinese trader said.

2. Coking coal prices surge $102/t w-o-w: Seaborne coking coal prices surged by $102/t this week with the outbreak of Russia-Ukraine war and absence of Russian material, leading to increased demand for an alternative to Australian coal.

The latest price for the premium HCC grade is assessed at around $560/t FOB Australia in comparison with $458/t FOB a week prior.

3. China's billets prices rise towards weekend: Steel billets prices in China's Tangshan witnessed a sharp rise of RMB 150/t ($24/t), w-o-w. Domestic billets prices stood at RMB 4,680/t ($741/t), inclusive of 13% VAT, on 4 Mar'22. According to data maintained with SteelMint, the Chinese SHFE rebar futures contract for May'22 delivery closed at RMB 4,901/t ($776/t) on 4 Mar'22, a sharp rise of RMB 284/t ($45/t), w-o-w.

4. HRC export offers rise w-o-w: Chinese mills raised HRC export offers by $50-60/t to $880-890/t FOB China in comparison with $820-840/t a week ago on the back of improved demand in the overseas market amidst active buying from South East Asian region.

"Chinese export allocations have increased. For HRCs, China is quite active. I believe it sold 200,000-300,000 tonnes (t) in the last 10 days," said a reliable trade channel participant.

In the domestic market, prices jumped by a whopping RMB 300/t ($47/t) to RMB 5,150-5,160/t ($815-817/t) eastern China in contrast with RMB 4,850-4,860/t ($768-769/t) eastern China last week. The sharp gains in SHFE futures on expectation that demand shall increase for Chinese-origin cargoes post-the Russia-Ukraine war. In addition, a pick up in seasonal demand in the domestic market pushed HRC prices upward.

5. Domestic rebar prices rise RMB 100/t: China's domestic rebar prices stood at RMB 4,800-4,840/t ($760-766/t) northern China, up by RMB 100/t ($16/t) compared to RMB 4,700-4,740/t ($744-750/t) northern China in the previous week. Prices gained support from improved demand and a rise in rebar futures following higher iron ore and thermal coal prices.