China weekly: Steel prices rise following uptick in SHFE futures

• Steel inventories rise in mid-May'24
  
  
• Shagang Steel keeps long steel prices stable
  
  

Chinese steel prices showed an upward trend this week, with HRC, rebar, billet, coking coal and iron ore prices rising. HRC export offers, however, fell this week and domestic demand remained sluggish.

The average daily crude steel output of CISA-affiliated mills stood at 2.209 mnt in mid-May 2024, up by 0.81% against 2.191 mnt in early-May.

CISA reported total steel inventory of key enterprises in mid-May at 16.826 mnt, up by 547,000 t or 3.36% compared to 16.279 mnt in early-May.

1.Iron ore spot prices rise by $3/t w-o-w: The benchmark iron ore fines price increased w-o-w by $3/t to $121/ t CFR China on 24 May. The rise in seaborne market activity is due to carryover effect from recent economic news, as well as increased demand for downstream steel products. As per reports, the decreased premiums for medium-grade fines may be attributed to the growing stockpiles of iron ore at ports. Meanwhile, decrease in finished steel inventory might drive the demand for raw materials. However, the bullish trend seems to be unsustainable due to ample supply from traders and miners. Prices for June delivery may decline to $105-$110/dmt CFR China.

Iron ore inventory at major Chinese ports inched up by 0.15 mnt to 144.65 mnt on 23 May, according to SteelHome data.

a) Spot pellet premium stable w-o-w: Spot pellet premium for Fe 65% grade pellets remained stable w-o-w at $11.55/t on 22 May.

b) Spot lump premium rise w-o-w: Spot lump premium increased by 0.011 at $0.1310/dmtu on 24 May.

2. Coking coal prices edge up: Coking coal prices moved by $4/t w-o-w to $239/t FOB on 24 May due to increased demand for July-loading cargoes, with international buyers bidding higher, expecting tighter supply from key Australian miners and growing demand from Asian end-users.

3. Billet prices rise w-o-w: Billet prices in Tangshan rose by RMB 60/t ($8/t) w-o-w to RMB 3,560/t (501/t) on 24 May. Prices include 13% VAT. Supportive sentiments from raw material, finished steel markets and hike in rebar futures kept billet prices supported. However, demand remained low as compared to market expectation. SHFE rebar futures (October, 2024 delivery) increased by RMB 72/t ($10/t) w-o-w to RMB 3,788/t ($533/t) on 24 May, 2024.

4.HRC prices increase by $4/t: China's HRC prices edged up by RMB 30/t ($4/t) w-o-w to RMB 3,840/t ($530/t) against RMB 3,810/t ($526/t) a week ago, following the upward trend in SHFE futures. SHFE futures (October contract) rose by RMB 57/t ($8/t) w-o-w to RMB 3,904/t ($539/t) as compared to RMB 3,847/t ($531/t). However, HRC export offers declined by $5/t to $540/t against $545/t previous week.

5.Rebar offers up $4/t: Chinese rebar offers went up by RMB 30/t ($4/t) w-o-w to RMB 3,840/t ($530/t) against RMB 3,810/t ($/t) last week. SHFE futures (October contract) increased by RMB 76/t ($10/t) w-o-w to RMB 3,786/t ($523/t) as compared to RMB 3,710/t ($512/t), a week ago.

In China, the price of rebar, used in construction, has kept inching up, as, the government announced policies to help the housing market. Despite rise in prices, demand remained slow.

In April, China's steel bar output was 16.343 mnt, a y-o-y decrease of 21.7%; moreover, from January to April, China's steel bar output was 66.306 mnt, down 12.8% y-o-y.

Shagang Steel has kept long steel prices stable for late-May'24 sales. Effective prices:

• Rebar (16-25 mm): RMB 4,020/t ($556/t)
  
  
• Wire rod (6-10 mm): RMB 4,070/t ($562/t)
  
  
• Coiled rebar (8-10 mm): RMB 4,060/t ($561/t)
  
  
• All prices are ex-mill, including VAT.
  
  

Outlook: A typical seasonal slowdown after the peak season is the norm amid fluctuating trading activities. Weather variations across regions are also impacting deals. Production may rise in the near term, but demand growth might not match last year's pace. Stockpiles are falling m-o-m, though they are still a bit higher compared to this time of last year.