China weekly: Steel prices show divergent trends against uncertain market outlook

• Iron ore spot prices decrease by $2/t w-o-w
  
  
• Domestic HRC prices edge down, export offers rise
  
  

China's steel market exhibited mixed trends this week amid uncertain market conditions and weak demand. Notably, domestic steel prices, especially that of billets and HRC, decreased due to shifts in raw material costs and futures market trends. While rebar prices edged up, coking coal prices remained largely stable, and iron ore prices ticked downward.

1. Iron ore spot prices decrease by $2/t w-o-w: The benchmark iron ore fines price fell by $2/t w-o-w to $103/t CFR China on 6 December 2024. Iron ore prices declined later in the week due to weak demand and lower steel production activity. A significant decrease in hot metal output, combined with consistently high inventory levels, has weakened the supply-demand balance. Moreover, increased maintenance scheduling of blast furnaces by inland Chinese steel mills has further reduced iron ore demand. As a result, slower destocking and a rise in portside iron ore inventories have added the downward pressure on prices.

Iron ore inventories at China's major ports decreased by 2.4 million tonnes (mnt) to 146.1 mnt on 5 December compared to last week, according to SteelHome data.

a) Spot pellet premium inches up w-o-w: Spot pellet premium for Fe 65% grade pellet increased by $0.10/t w-o-w to $17.80/t CFR China on 4 December.

b) Spot lump premium decreases w-o-w: Spot lump premium fell by $0.002/t to $0.1350/dmtu on 6 December.

2. Coking coal prices stable: Coking coal prices remained largely stable w-o-w at $204/t FOB on limited trades and subdued demand in key importing regions. RB2 (5500 NAR) grade coal prices remain unchanged w-o-w at $89/t FOB South Africa. China's thermal coal prices may extend their downtrend into December, mainly due to a surplus supply of the fossil fuel in the spot market.

3. Chinese billet prices fall w-o-w amid uncertain market dynamics: Billet prices in China's Tangshan fell by RMB 40/t ($6/t) w-o-w to RMB 3,070/t ($422/t), including 13% VAT, on 6 December. Volatility in raw material, finished steel prices and rebar futures throughout the week along with weak demand leading to high portside inventory levels have weighed on billet prices.

4. Domestic HRC prices edge down: Chinese HRC offers edged down w-o-w by RMB 10/t ($1/t) to RMB 3,460/t ($476/t), amid decline in HRC futures and finished steel demand. SHFE HRC futures (January 2025 contract) fell w-o-w by RMB 30/t ($4/t) to RMB 3,462/t ($376/t).

China's export offers for HRC went up by $5/t w-o-w to $490/t this week, but trading remained limited as uncertainty in demand still persist in the global market.

5. Domestic rebar prices inch up w-o-w: China's rebar offers inched up by RMB 20/t ($3/t) w-o-w to RMB 3,260/t ($449/t) against RMB 3,240/t ($446/t) in the previous week due to rise in rebar futures. SHFE rebar futures (January 2025 contract) increased by RMB 102/t ($14/t) w-o-w to RMB 3,329/t ($458/t).

Moreover, Shagang Steel kept prices of its long steel products - rebars, coiled rebars, and wire rods - unchanged for early-Dec'24 sales. Effective prices stood at:

• Rebar (16-25 mm): RMB 3,700/t ($508/t)
  
  
• Coiled rebar (8-10 mm): RMB 3,710/t ($509/t)
  
  
• Wire rod (6-10 mm): RMB 3,620/t ($497/t)
  
  

Outlook

Chinese steel prices are expected to remain volatile in the short term, with rebar prices potentially rising, while billet and HRC prices may soften due to weak demand and declining raw material costs.