China weekly: Steel prices rise w-o-w amid production cuts, decline in inventories

Chinese steel prices witnessed an uptrend this week amid lower production by mills and falling inventories. However, prices of iron ore, the key steelmaking raw material, fell w-o-w amid weak demand.

Steel inventory at key Chinese mills stood at 16.59 mnt in late-July, a m-o-m decrease of 2.43 mnt, or 12.79%, as per China Iron and Steel Association (CISA) data. Inventory increased by 5.29 mnt or 46.91% compared with the beginning of this year and up by 2.78 mnt, or 20.15% compared with late-July 2021.

The average daily crude steel output of CISA-affiliated mills stood at 1.89 mnt in late-July, down by 7.25% m-o-m.

Product wise sentiments-

1. China spot iron ore prices decrease on week: Chinese spot iron ore fines Fe 62% prices opened at $112.90/t CNF China for the week and assessed at $106.95/t, CNF China towards the weekend. The seaborne market saw low levels of trading activity due to bearish demand outlook. Furthermore, the news about production cuts and sintering restrictions was circulating in the market which impacted activities.

Iron ore inventory at major Chinese ports stood at 136.6 mnt this week, up 1.1 mnt as against 135.5 mnt a week ago, as per data maintained by SteelHome.

a) Spot pellet premium stable w-o-w: Spot pellet premium for Fe 65% grade pellets was assessed at $26.45/t, stable against last week.

b) Spot lump premium up w-o-w: Spot lump premium stood at $0.0960/dmtu, up as against $0.0895/dmtu last week. Lump premiums rose slightly with sources seeing support at current premium levels.

2. Coking coal prices rise w-o-w: Coking coal prices rose by $12/t w-o-w to $203/t FOB compared with $191/t FOB a week ago. Indian coking coal demand gradually improved with easing of monsoon and fall in prices; however, steel sales remained modest.

3. China's billet prices rise towards weekend: Steel billet prices in China's Tangshan witnessed a rise of RMB 80/t ($12/t) w-o-w to RMB 3,710/t ($549/t), including 13% VAT, on 5 August, 2022. According to data maintained with SteelMint, China's SHFE rebar futures contract for October 2022 delivery closed at RMB 4,036/t ($597/t) on 5 August, witnessing an increase of RMB 40/t ($6/t) w-o-w.

4. HRC export offers up $17/t w-o-w: China's HRC (SS400) export offers rose by $17/t w-o-w to $605/t FOB China against $588/t FOB a week ago. Improved sentiments resulted in the rise of export offers and SHFE HRC futures. According to data maintained with SteelMint, SHFE HRC futures contract for October delivery rose by RMB 31/t ($5/t) w-o-w to RMB 4,005/t ($592/t) as on 5 August'22.

China's domestic HRC prices rose by RMB 90/t ($13/t) to RMB 3,990/t ($590/t) in northern China compared with RMB 3,900/t ($577/t) in the previous week. Prices increased due to lower inventories. However, market participants anticipate a drop in prices in the near term amid production cuts and subdued demand for HRC in the market.

In addition, China's HRC stocks declined 1% w-o-w to 2.69 mnt as on 5 August, against 2.72 mnt a week ago, as per Lange Steel data.

5. Domestic rebar prices up w-o-w: China's domestic rebar prices increased by RMB 120/t ($18/t) to RMB 4,210/t ($623/t) in western China against RMB 4,090/t ($605/t) last week. Prices increased on the back of acceleration in construction activities, which further led to a sharp fall in rebar inventories.

China's rebar stocks declined sharply by 6% w-o-w to 5.22 mnt as on 5 August, compared with 5.53 mnt in the previous week, as per Lange Steel data.

6. Shagang Steel rolls over long steel prices, lifts scrap buy prices: China's Shagang Steel rolled over long steel products prices for early-Aug'22 sales. Effective prices-

• Rebar (16-25 mm): RMB 4,500/t ($665/t)
  
  
• Wire rods (6-10 mm): RMB 4,510/t ($667/t)
  
  
• Coiled rebar (8-10 mm): RMB 4,600/t ($680/t)
  
  

The steelmaker lifted scrap prices by RMB 100/t ($15/t) for all grades from 1 August. Post-revision, prices of HMS (6-10mm) stood at RMB 2,770/t ($410/t) delivered to headquarters, including 13% VAT.