China weekly: Steel prices show mixed trend despite govt stimulus measures

Chinese steel prices exibited mixed trends this week amid introduction of stimulus by Chinese government, which resulted in gains in HRC and rebar prices on the Shanghai Futures Exchange (SHFE) over the week. However, cold weather in some provinces impacted demand for construction steel.

Product-wise sentiments:

1. China spot iron ore prices increase w-o-w: Chinese spot iron ore fines Fe 62% prices opened at $98.9/t CNF China for the week and assessed at $103.1/t, CNF China towards the weekend. Spot prices of iron ore in China improved as confidence in the market strengthened following the release of China's stimulating property market policies.

According to sources, the majority of market participants feel the long-term outlook is optimistic for iron ore, but weak demand especially from the end-users is a concern.

Iron ore inventory at major Chinese ports stood at 137.5 mnt on 1 December 2022 inched down by 0.5 mn t as against 138 mn t a week ago, as per data maintained by SteelHome.

a) Spot pellet premium down on week: Spot pellet premium for Fe 65% grade pellets was assessed at $21.85/t, moved down as against $22.35/t last week.

b) Spot lump premium up w-o-w: Spot lump premium stood at $0.1500/dmtu, rise as against $0.1470/dmtu last week.

According to sources, seaborne lump premiums increased due to increased speculative buying from traders. However, the vast majority of sources continue to see downward pressure on lump premiums, owing to the limited effects of sintering cuts and weak steel mill demand.

2. Coking coal unchanged w-o-w: Coking coal prices remained largely unchanged at $248/t FOB against $247/t FOB a week ago. The prices remained stable due to muted demand from global market participants.

3. China's billet prices marginally up w-o-w: Steel billet prices in China's Tangshan decreased by RMB 10/t ($1/t) w-o-w. Prices stood at RMB 3,550/t ($505/t), including 13% VAT, on 2 December. The stability in finished steel prices and significant rise in futures has supported domestic billet prices, SteelMint notes. According to data maintained with SteelMint, China's SHFE rebar futures contract for January 2023 delivery closed at RMB 3,808/t ($542/t) on 2 December, a rise of RMB 72/t ($10/t) w-o-w.

4. HRC export offers down w-o-w: China's HRC export offers dropped by $5/t w-o-w to $545/t FOB China as compared with $550/t FOB last week. This week disparity between bids and offers weighed on the market sentiments resulting in limited enquiries from buyers. Meanwhile, India also turned active on the overseas trade platform with the removal of 15% export duty recently. Indian mills were heard concluding deals to Middle East in-turn increasing the competition.

Domestic HRC prices edged by RMB 60/t ($8/t) w-o-w to RMB 3,840/t ($547/t) compared with RMB 3,780/t ($538/t) a week ago. The reduction in Reserve Requirement Ratio (RRR) by People's Bank of China coupled with introduction of 16-point rescue package for the real estate sector have lifted the market sentiments. Also, gains in SHFE HRC futures have contributed towards increase in spot market prices.

HRC futures on the Shanghai Futures Exchange (SHFE) rose by RMB 123/t ($17/t) w-o-w to RMB 3,913/t ($557/t) as on 2 December.

5. Domestic rebar prices drop w-o-w: China's domestic rebar prices dropped by RMB 10/t ($1/t) w-o-w to RMB 3,740/t ($532/t) from RMB 3,750/t ($534/t) last week. Demand for construction steel remained under pressure due to adverse weather condition in some provinces of China. Moreover, construction activities have been put on hold in northern regions due to cold weather.

6. Shagang rolls over long steel prices: China's Shagang Steel has rolled over its construction steel prices, for early-December 2022 sales. Effective prices-

• Rebar (16-25 mm): RMB 3,950/t ($562/t)
  
  
• Wire rods (6-10 mm): RMB 4,360/t ($621/t)
  
  
• Coiled rebar (8-10 mm): RMB 4,450/t ($634/t).
  
  
• All prices are ex-mill, including VAT.