China weekly: Steel prices rise ahead of National Day holidays

• Total steel inventory, crude steel output edge up

  
  
  

• Economic stimulus news boosts iron ore fines prices
  
  
• Shagang Steel's rebar offers up amid rising SHFE futures
  
  

The Chinese steel market witnessed a surge in prices across various steel products for the week. This upward trend was primarily driven by a combination of factors, including recent economic stimulus measures, increased steel demand, and rising raw material costs.

The average daily crude steel output of CISA-affiliated mills stood at 1.98 million tonnes (mnt) in mid-September 2024, an increase of 2.7% from 1.93 mnt in early September 2024. CISA reported that the total steel inventory at key enterprises reached 15.65 mnt in mid-September 2024. This represents a rise of 4.5% or 680,000 tonnes (t) from 14.97 mnt in early-September 2024.

1. Iron ore spot prices sharply rise: The benchmark iron ore fines price significantly increased by $11/t w-o-w to $101.8/t CFR China on 27 September 2024 amid recent economic stimulus measures. China's central bank has announced a plan to reduce the reserve requirement ratio by 50 basis points, aiming to inject around 1 trillion RMB ($142.20 billion) of long-term liquidity into the market. This fuelled optimism about increased demand for iron ore, with active trades concluded in the seaborne market. These actions have improved the outlook for key iron ore-consuming sectors such as construction and infrastructure, especially with policies aimed at stabilising the property market.

Iron ore inventories at China's major ports decreased by 0.7 mnt to 145.9 mnt on 26 September, compared to the previous week, according to SteelHome data.

a) Spot pellet premiums remain stable: Spot premiums for Fe 65% grade pellets remained stable w-o-w at $16/t CFR China on 25 September.

b) Spot lump premiums up: Spot lump premiums edged up by $0.024/dry metric tonne unit (dmtu) w-o-w at $0.1340/dmtu on 27 September.

2. Coking coal prices rise: Coking coal picked up by 9% to $204.75/t FOB. Prices surged on strong steel fundamentals.

3. Chinese billet prices rise on improved market sentiments: Billet prices in Tangshan increased significantly by RMB 150/t ($21/t) w-o-w to RMB 3,050/t ($435/t) on 27 September 2024 (inclusive of 13% VAT). A recovery in raw material and finished steel prices and a hike in rebar futures throughout the week, along with favourable macroeconomic news, supported billet prices. Meanwhile, rebar futures (January 2025 delivery) on the Shanghai Futures Exchange (SHFE) inched up by RMB 17/t ($2/t) w-o-w to RMB 3,200/t ($456/t) on 27 September.

4. Domestic HRC increases: China's HRC offers increased by RMB 110/t ($16/t) w-o-w to RMB 3,280/t ($468/t) as compared to RMB 3,170/t ($452/t). This upward trend is attributed to a surge in domestic steel demand, as consumers stocked up ahead of the upcoming National Day holidays (Golden Week), which will take place from 1 to 7 October 2024.

Furthermore, Chinese HRC export offers soared by $15/t w-o-w to $475/t against $460/t last week, following the upward trend in SHFE futures. SHFE HRC futures (January contract) climbed up by RMB 157/t ($22/t) w-o-w to RMB 3,405/t ($486/t) from RMB 3,248/t ($463/t) last week.

5. Domestic rebar prices rise w-o-w: China's rebar offers rose RMB 170/t ($30/t) w-o-w to RMB 3,520/t ($502/t) as compared to RMB 3,350/t ($478/t) a week ago, mirroring the surge in SHFE rebar futures. SHFE rebar futures (January 2025 contract) increased by RMB 125/t ($18/t) w-o-w to RMB 3,319/t ($473/t) against RMB 3,194/t ($456/t) in the previous week.

China's Shagang Steel announced a price hike for their rebar products for late-September 2024 sales. Prices of both standard and coiled rebars increased by RMB 100/t ($14/t). However, wire rod prices remained stable. Effective prices are as follows:

• Rebars (16-25 mm): RMB 3,600/t ($511/t)
  
  
• Coiled rebars (8-10 mm): RMB 3,610/t ($512/t)
  
  
• Wire rods (6-10 mm): RMB 3,420/t ($485/t)
  
  

All prices are ex-mill, including VAT.

Outlook

The Chinese steel market is likely to remain volatile in the near term, influenced by a combination of domestic and global factors. Moreover, the country's efforts to transition towards a more sustainable economy will continue to influence the market.