China weekly: Steel prices show mixed trends ahead of mid-autumn festival holidays
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- China's steel exports rise by 21% in August
- Shagang Steel keeps long steel prices stable
- Baosteel keeps HRC prices flat
Chinese steel market has witnessed a positive shift in sentiment. Prices for key products, hot-rolled coil (HRC) and rebar have rebounded, mirroring the upward trend in raw material prices, including iron ore and billet. However, the price of coking coal continues to decline.
The average daily crude steel output of CISA-affiliated mills stood at 1.885 mnt in late August 2024, a decrease of 5.42% against 1.993 mnt in mid-August. CISA reported that the total steel inventory at key enterprises reached 14.541 million tonnes (mnt) in late August 2024. This represents a decline of 1.912 mnt or 11.62% from 16.45 mnt in mid-August.
China's steel exports increased by 14.7% y-o-y to 9.5 million tonnes (mnt) in August 2024 against 8.3 mnt in August 2023, as per the General Administration of Customs. Additionally, the export volume surged by 21% m-o-m in August compared to 7.82 mnt in July 2024.
1. Iron ore spot prices rise by $1/t w-o-w: The benchmark iron ore fines price inched up w-o-w by $1/t to $92.65/t CFR China on 13 Sep'24 amid improved liquidity and increased buying interest on low-price levels. Declining rebar and hot-rolled coil inventories, signalling a recovery in steel demand. Additionally enhanced purchasing activity ahead of the mid-autumn festival and better export volumes for finished steel, further supported the uptrend. The price surge was primarily due to increased steel sales and a slight rise in apparent consumption compared to the previous week.
Iron ore inventories at China's major ports decreased by 1.1 million tonnes (mnt) to 149.4 mnt on 12 September, compared to the previous week, according to SteelHome data.
a) Spot pellet premium drops w-o-w: Spot pellet premium for Fe 65% grade pellets edged down by $0.25/t at $16.25/t CFR China on 11 September.
b) Spot lump premium falls w-o-w: Spot lump premium decreased by $0.0275/dmtu at $0.1125/dmtu on 13 September.
2. Coking coal prices drop: Coking coal prices has been dropped by $4/t to $181/t FOB. Coking coal prices continue the drop on weak steel sentiments.
3.Chinese billet prices rebound w-o-w before holidays: Billet prices in Tangshan recovered by RMB 150/t ($21/t) w-o-w to RMB 2,910/t ($410/t) on 13 September which includes 13% VAT. Declining inventories amid active restocking before mid-Autumn festival holidays, rise in raw materials, finished steel prices and rebar futures have supported billet prices. SHFE rebar futures (January 2025 delivery) increased by RMB 159/t ($22/t) w-o-w to RMB 3,185/t ($449/t) on 13 September.
4. Domestic HRC offers increase: China's HRC offers rose by RMB 130/t ($18/t) w-o-w to RMB 3,180/t ($448/t) from RMB 3,050/t ($430/t) previous week, following the improvement in demand. SHFE HRC futures (January contract) increased by RMB 98/t ($14/t) w-o-w to RMB 3,211/t ($453/t) as compared to RMB 3,113/t ($439/t) a week ago.
The upcoming mid-autumn festival holidays have boosted domestic steel demand as people are stocking up inventory before the festivities. This improvement in demand has driven up HRC prices.
However, HRC export offers fell by $15/t w-o-w to $ 450/t against $465/t last week.
Baosteel, world's leading steel manufacturer, has kept HRC prices stable m-o-m for Oct'24 sales. Worth mentioning here that prices declined for two months. Moreover, hot-dip galvanized prices also remained flat. Furthermore, China's SHFE HRC futures showed a mixed trend due to weak domestic steel demand.
5.Domestic rebar rise w-o-w: China's domestic rebar offers up by RMB 60/t ($8/t) w-o-w to RMB 3,310/t ($467/t) from RMB 3,250/t ($458/t) the previous week, mirroring the rise in SHFE rebar futures. SHFE rebar futures (January contract) went up by RMB 91/t ($13/t) w-o-w to RMB 3,158/t ($445/t) against RMB 3,067/t ($433/t) a week ago.
China's domestic rebar prices rose due to increased arbitrage trading and lower market inventories. Arbitrage traders actively bought rebar, which drove up spot prices. End users purchased limited amounts of rebar and did not plan to stock up ahead of China's Mid-Autumn Festival 15-17 September.
China's Shagang Steel has kept prices for rebar, wire rod, and coiled rebar unchanged for its mid Sep'24 sales. Effective prices are as follows:
- Rebar (16-25 mm): RMB 3,500/t ($492/t)
- Wire rod (6-10 mm): RMB 3,420/t ($481/t)
- Coiled rebar (8-10 mm): RMB 3,510/t ($494/t)
All prices are ex-mill, including VAT.
Outlook
The recent price rebound in the steel market is likely to continue due to improved supply-demand dynamics. While many mills have recently reduced production for maintenance, they are now gradually resuming operations, which could increase supply pressure.
Despite the current price rise, weak demand from major steel-using sectors and a long-term bearish outlook suggest caution among market participants. The rebound in domestic prices is expected to drive fluctuations and potential strengthening in China's steel export prices in the near future.