China weekly: Steel prices show mixed trends on rising inventories

• Steel inventories rise in early-May
  
  
• Bao steel increases HRC prices for June shipments
  
  
• Crude steel production decrease 7.2% y-o-y
  
  

Steel prices in China showed a mixed trend this the week. While iron ore, billet, and rebar prices went up, domestic HRC prices stayed flat and coking coal prices dropped. Even though the global market sentiment is sluggish, China held steady with its export offers.

China's crude steel production for April 2024 decreased by 7.2% y-o-y to 85.94 million tonnes (mnt) as compared to 92.63 mnt in April 2023. Moreover, the same edged down by 3% m-o-m as compared to 88.27 mnt in March 2024. In April, steelmakers reduced their crude steel production due to weak demand from customers and declining profitability.

The China Iron and Steel Association (CISA) reported total steel inventory of key enterprises in early-May 2024 stood at 16.279 million tonnes (mnt), up by 398,400 tonnes (t) or 2.51%compared to 15.881 mnt in late-April.

The average daily crude steel output of CISA-affiliated mills stood at 2.191 mnt in early-May 2024, went slightly down against 2.199 mnt in late-April.

1.Iron ore spot prices inch up by $1/t w-o-w: The benchmark iron ore fines price edge up w-o-w by $1/t to $118/ t CFR China on 17 May due to positive sentiment regarding upcoming policy measures concerning ultra-long government bonds. The Central Bank of China reduced interest rates on personal housing provident fund loans by 0.25 percentage points on May 18, affecting both first and second sets of loans. The announcement generated a bullish mood in the market, with traders anticipating favourable outcomes.

Iron ore inventory at major Chinese ports decreased by 0.65 mnt to 144.5 mnt on 16 May compared to last week according to SteelHome data.

a) Spot pellet premium inch up w-o-w: Spot pellet premium for Fe 65% grade pellets edged up by $ 0.2/t w-o-w at $11.55/t on 15 April.

b) Spot lump premium rise w-o-w: Spot lump premium increased by 0.027 at $0.1200/dmtu on 17 May'24.

2. Coking coal prices fall for the week: Coking coal prices fell w-o-w to $234/t FOB, on 17 May'24 amid oversupply of material and tepid demand from major importers.

3. China's billet prices rise by RMB 40/t ($6/t) w-o-w: Chinese billet prices rose w-o-w by RMB 40/t ($6/t) to RMB 3,500/t ($485/t) on 17 May, 2024. Improvement in raw material, finished steel prices and rebar futures have supported the billet prices. However, demand is yet to reach the expectation level of steel mills which has been weighed by fall in crude steel output. Meanwhile, Chinese SHFE rebar futures increased w-o-w by RMB 54/t ($7/t) to RMB 3,716/t ($514/t) on 17 May 2024.

4. HRC prices remains flat: China's HRC prices remained stable w-o-w at RMB 3,810/t ($527/t) with rising SHFE futures. SHFE futures (October contract) rose by RMB 50/t ($7/t) w-o-w to RMB 3,847/t ($532/t) against RMB 3,797/t ($526/t), a week ago, rising SHFE futures are keeping China's domestic sentiments high. However, with slow Global market sentiments, Chinese steelmakers kept their HRC export offers flat at $545/t throughout the week.

5.Rebar prices increase w-o-w: Chinese rebar prices inched up by RMB 20/t ($3/t) w-o-w reaching RMB 3,810/t ($527/t) against RMB 3,790/t ($525/t), last week, following the rise SHFE futures. SHFE futures (October contract) increased by RMB 58/t ($8/t) w-o-w to RMB 3,710/t ($514/t) as compared to RMB 3,652/t ($505/t), previous week.

This increase in domestic rebar prices is likely because people involved in the steel industry believe that the Chinese government will take steps to support the construction and infrastructure markets.

Baosteel has increased HRC prices by RMB 50/t ($7/t) m-o-m for June'24 sales, according to BigMint's sources. The company has increased prices following the rise in SHFE futures post-Labour Day holidays. Furthermore, China's steel inventories are also declining due to which prices are on the higher side. However, prices of hot-dip galvanized and heavy plate remained stable for the month.

Outlook: China's short-term steel outlook is mixed. Government efforts to boost construction may raise demand, but supply increases, falling steel prices, and rising iron ore costs could create challenges. Disappointing post-holiday steel price hikes indicate continued weak demand despite government stimulus.