China weekly: Steel prices show mixed trend, SHFE futures edge up

China's steel market displayed a mixed performance this week, with Shanghai Futures Exchange (SHFE) prices trending upward. Notably, domestic prices for hot-rolled coil (HRC) and rebar rose w-o-w, while billet prices also saw a weekly increase. In the raw materials segment, spot iron ore prices rose, but coking coal prices declined over the week.

The China Iron and Steel Association (CISA) has reported that the total steel inventory at key enterprises reached12.59 million tonnes (mnt) in early-January 2025. This represents a decline of 1.59 mnt or 11.2% m-o-m against 14.18 mnt in early-December 2024.

1. Iron ore spot prices up $6/t w-o-w: Iron ore spot prices rose by $6/t w-o-w to $104/t CFR China as of 17 January 2025. The increase was primarily driven by concerns over adverse weather conditions in Western Australia, which caused delays of 3-4 days for cargoes from affected ports. However, the impact on overall iron ore supply remained limited. Liquidity for seaborne fines was subdued as mills finalised their restocking for January. Meanwhile, robust demand for medium- and low-grade sintering fines persisted, supported by mild winter weather sustaining construction activities in northern China. Looking ahead, a potential uptick in demand is anticipated in February following the holiday period.

a) Spot pellet premium inches down: Spot pellet premium for Fe 65% grade pellet decreased by $0.2/t w-o-w to $18.35/t CFR China on 15 January.

b) Spot lump premium edges up: The spot lump premium increased by $0.001/t to $0.1430/dmtu on 17 January.

2. Coking coal prices drop w-o-w: Australian coking coal prices fell $7/t w-o-w. PHCC was assessed at $189/t FOB Australia. Weak demand, thin liquidity and a seventh round of met coke price cut in China kept coking coal prices under pressure.

3. Chinese billet prices rise sharply by RMB 150/t ($20/t) w-o-w: Billet prices in China's Tangshan rose sharply by RMB 150/t ($20/t) w-o-w to RMB 3,080/t ($420/t), including 13% VAT, on 17 January. Billet prices have increased as the market continues to recover, driven by recovery in rebar futures and finished steel prices ahead of the Lunar New Year holidays despite subdued physical demand. Meanwhile, SHFE rebar futures (May 2025 delivery) increased significantly by RMB 170/t ($23/t) w-o-w to RMB 3,372/t ($460/t) on 17 January.

4. Domestic HRC prices rise: Chinese HRC offers rose by RMB 120/t ($16/t) w-o-w to RMB 3,390/t ($463/t) as compared to RMB 3,270/t ($446/t) last week. This may be attributed to an uptrend in SHFE HRC futures and improved demand for finished steel. SHFE HRC futures (May 2025 contract) increased by RMB 153/t ($21/t) to RMB 3,462/t ($473/t) from RMB 3,309/t ($452/t) a week ago. However, China's export offers decreased by $10/t w-o-w to $455/t against $465/t last week.

5. Domestic rebar prices increase w-o-w: China's rebar offers went up by RMB 80/t ($11/t) w-o-w to RMB 3,300/t ($450/t) compared to RMB 3,220/t ($440/t) a week ago. Prices rose due to improved domestic demand, as buyers engaged in restocking before the start of the Chinese Lunar year. SHFE rebar futures (May 2025 contract) increased by RMB 143/t ($20/t) w-o-w to RMB 3,346/t ($457/t) from RMB 3,203/t ($437) last week.

Outlook

The market is currently experiencing a short-term rebound driven by pre-holiday restocking and surge in the futures markets. However, the sustainability of this recovery depends on the actual strength of downstream demand in China and global economic conditions. The coking coal market remains weak, while iron ore is dependent on sustained Chinese steel demand.