China weekly: Steel prices show mixed trends post-Labour Day holidays

• Steel exports rise by 16.3% y-o-y in April'24
  
  
• Steel inventories fall sharply by 12.34%
  
  

China's steel prices showed mixed trends post-Labour Day holidays this week. Domestic prices of HRC, rebar and billets remained stable Meanwhile, prices of iron ore and coking coal showed a recovery.

China's steel exports saw a growth of 16.3% y-o-y in April 2024 reaching 9.224 million tonnes (mnt) as compared to 7.93 mnt in April 2023, as per General Administration of Customs. However, on m-o-m basis, the same fell by 7% m-o-m against 9.89 mnt a month ago.

The China Iron and Steel Association (CISA) reported total steel inventory of key enterprises in late-April 2024 stood at 15.881 mnt, down by 2.235 mnt or 12.34% compared to 18.116 mnt in mid-April.

The average daily crude steel output of CISA-affiliated mills stood at 2.199 mnt in late-April, up by 3.8% from 2.119 mnt in mid-April. On the other hand, output rose by 3.7% m-o-m against 2.121 mnt in late-March.

1. Iron ore spot prices recover after Chinese holidays: The benchmark iron ore fines price closed this week at $117/ t CFR China on 10 May as participants returned from Labour Day holidays which improved iron ore prices. Market participants started to focus on post-holiday purchasing mostly for June-arrival cargoes.

Iron ore inventory at major Chinese ports increased by 0.05 mnt to 145.15 mnt on 9 May compared to the last week according to SteelHome data.

a) Spot pellet premium stable w-o-w: Spot pellet premium for Fe 65% grade pellets remained stable w-o-w at $11.35/t on 8 May.

b) Spot lump premium inches down w-o-w: Spot lump premium edged down by 0.001 to $0.0930/dmtu on 10 May, 2024.

2. Coking coal prices recover towards weekend: Coking coal prices edged up towards second half of the week to $243/t FOB Australia, on 10 May, 2024 amid increased appetite from Chinese buyers on rising domestic coal prices.

3. China's billet prices remain stable post-Labour Day holidays: Chinese billet prices remained stable after Labour Day holidays at RMB 3,460/t ($479/t) on 10 May, 2024 against 30 April, 2024. Positive market sentiments from raw material, finished steel prices, rebar futures and improvement in demand from mills after holidays kept billet prices supported. Meanwhile, Chinese SHFE rebar futures increased marginally by RMB 6/t ($1/t) to RMB 3,662/t ($507/t) on 10 May, 2024 against 30 April.

4.HRC prices remain unchanged: China's HRC prices remained stable at RMB 3,810/t ($527/t) against two weeks ago, amid volatile SHFE futures. SHFE futures (October contract) edged down by RMB 21/t ($3/t) to RMB 3,797/t ($526/t) as compared to RMB 3,818/t ($528/t) on 30 April. However, China's HRC export offers went up by $5/t w-o-w to $545/t for the week, in the absence of other competitive origin offers.

5.Rebar prices remain flat: Chinese rebar prices remained unchanged at RMB 3,790/t ($525/t) against two weeks ago. SHFE futures (October contract) went slightly down by RMB 18/t ($2/t) to RMB 3,652/t ($505/t) on 10 May as compared to RMB 3,670 ($508/t) on 30 April.

After Labour Day holidays, Chinese domestic steel prices have been volatile due to both weakening demand and negative outlook on the country's property market. Moreover, fear of fall in the property market among rebar market players pushed rebar prices even lower. Additionally, the lifting of home purchase restrictions in some major cities indicates significant weakness in the property market, prompting local governments to provide further support.

Outlook: China's steel market appears cautiously optimistic. Export growth and falling inventories are positive signs, but the ongoing weakness in the domestic property market poses a significant risk.