China weekly: Steel prices show mixed trends amid volatile futures

Chinese steel prices showed mixed trends this week amid volatile HRC and rebar futures on the Shanghai Futures Exchange (SHFE).

Steel inventory:

• Steel inventory at CISA mills stood at 17.74 million tonnes (mnt) in early-March, 2023. Volumes rose by 284,300 tonnes (t) or 1.63% over 17.41 mnt in late-February.
  
  
• Inventory dropped 325,400 t or 1.80% compared to early-February.
  
  
• Inventory increased by 1.02 mnt or 6.13% compared to the year-ago period.
  
  

Crude steel output:

• The average daily crude steel output of CISA-affiliated mills stood at 2.15 mnt in early-March, down 3.08% from late-February.
  
  
• The average daily finished steel output stood at 2.02 mnt in the period under review, down 10.39% m-o-m. Output increased by 5.8% y-o-y.
  
  
• The average daily pig iron output stood at 1.92 mnt in early-March, down 4.13% m-o-m and 10.2% y-o-y.
  
  

Product-wise sentiments-

1. China spot iron ore prices rise w-o-w: Chinese spot iron ore fines Fe 62% prices stood at $132/t CNF China on 17 March, up by $2.05/t w-o-w against $129.95/t CNF China in the previous week. The demand for iron ore in China is now strong and most mills are running at higher operating rates as a result of increased production margins. Hence, iron ore prices remain supported.

According to SteelHome data, iron ore inventory at major Chinese ports stood at 137.6 mnt on 17 March, a decrease of 1 mnt from 138.6 mnt last week.

a) Spot pellet premium stable w-o-w: Spot pellet premium for Fe 65% grade pellets was assessed at $19.10/t, stable compared to last week.

b) Spot lump premium increases w-o-w: The spot lump premium stood at $0.1060/dmtu, up 0.0120 as against $0.0940/dmtu last week.

2. Coking coal prices drop: Coking coal prices fell by $22/t w-o-w to $327/t FOB from $363/t FOB. Indian and Chinese buyers were on the sidelines expecting further correction in prices.

3. Chinese billet prices fall towards the weekend: Billet prices in China's Tangshan fell by RMB 30/t ($4/t) to RMB 4,000/t ($581/t), including 13% VAT, on 17 March. Decline in futures throughout the week weighed on billet prices. According to data maintained with SteelMint, China's SHFE rebar futures contract for May delivery closed at RMB 4,262/t ($619/t) on 17 March, a significant fall of RMB 52/t ($8/t), w-o-w.

4. HRC export offers stable: China's HRC export offers hovered at $695/t FOB Rizhao, stable w-o-w. Volatility in SHFE HRC prices prompted Chinese mills to keep their offers stable.

Domestic HRC prices were also stable w-o-w at RMB 4,270/t ($619/t). However, on the first day of the week, prices reached a nine-month high as demand recovered more than expected. Later, towards the middle of the week, prices declined as flat steel futures dropped following the release of negative economic data.

HRC futures on the SHFE fell by RMB 81/t ($11/t) w-o-w to RMB 4,329/t ($628/t) on 17 March from RMB 4,410/t ($640/t) in the preceding week.

5. Domestic rebar prices inch up: Chinese rebar prices inched up to RMB 4,260/t ($618/t) as against RMB 4,240/t ($615/t) last week. Prices were supported by active arbitrage, even though end-user demand was weak.

6. Shagang trims scrap purchase prices: Shagang Steel has cut scrap purchase prices by RMB 50/t ($7/t) for all grades of scrap. Post revision, HMS (6-10 mm) prices stood at RMB 3,230/t ($469/t) delivered to headquarters, including 13% VAT, effective from 16 March.