China weekly: Steel prices show mixed trends post mid-Autumn festival holidays

The Chinese steel market experienced mixed trends following the mid-Autumn festival holidays. Domestic prices for hot-rolled coil (HRC) saw a slight decline, whereas those for rebar and billet exhibited an upward trend. Iron ore prices remained range bound, while coking coal prices experienced a surge.

The average daily crude steel output of China Iron and Steel Association (CISA)-affiliated mills stood at 1.936 million tonnes (mnt) in early September 2024, an increase of 2.7% against 1.885 mnt in late August 2024. The CISA reported that the total steel inventory at key affiliated enterprises touched 14.97 mnt in early September 2024. The inventory levels increased by 2.9% or 430,000 tonnes (t) from 14.541 mnt in late August 2024

China's crude steel production for August 2024 stood at 77.92 mnt, reflecting a 10.4% y-o-y decline compared to 86.41 mnt in August 2023, according to data from the National Bureau of Statistics (NBS). Additionally, production fell by 6.1% m-o-m compared to 82.94 mnt in July 2024.

1.Iron ore spot prices rangebound w-o-w: The benchmark iron ore fines price inched down w-o-w by $1.3/t to $91.35/t CFR China on 20 September 2024. In the latter half of the week, positive macroeconomic news and strong market sentiments boosted the trading activity. Market sentiment was lifted by the US Federal Reserve's decision on 18 Sep to cut interest rates by 50 basis points to a range of 4.75%-5%-the first rate cut in nearly four years. Additionally, the resumption of production activities in northern China further improved the market outlook. The enhanced purchasing activity ahead of the mid-autumn festival and better export volumes for finished steel further supported the uptrend.

Iron ore inventories at China's major ports decreased by 2.8 million tonnes (mnt) to 146.6 mnt on 19 September, compared to the previous week, according to SteelHome data.

a) Spot pellet premium drop w-o-w: Spot pellet premium for Fe 65% grade pellets edged down by $0.25/t at $16/t CFR China on 18 September.

b) Spot lump premium up w-o-w: Spot lump premium inched up by $0.002/dmtu at $0.1100/dmtu on 20 September.

2. Coking coal prices rise w-o-w: Coking coal has picked up by 4% to $187.65/t FOB. However, market participants are awaiting clarity in direction

3.Chinese billet prices edge down post mid-autumn festival: Billet prices in Tangshan inched down by RMB 10/t ($1/t) w-o-w to RMB 2,900/t ($411/t) on 20 September, 2024. Prices are inclusive of 13% VAT. Volatility in raw material prices, rebar futures and finished steel prices throughout the week along with lower trades after mid-Autumn festival weighed on billet prices. SHFE rebar futures (January, 2025 delivery) remained largely stable w-o-w at RMB 3,183/t ($451/t) on 20 September.

4. Domestic HRC offers slightly down w-o-w: Chinese HRC offers slightly down by RMB 10/t ($1/t) w-o-w to RMB 3,170/t ($450/t) against RMB 3,180/t ($451/t) last week, following the three-day mid-Autumn festival holiday, market participant were on holiday from 15-17 Sept'24 due to which trade activities in the region remained limited.

However, HRC export offers rose by $10/t w-o-w to $ 460/t compared to $450/t last week, mirroring the increase in Chinese SHFE HRC futures which surged this week, prompting exporters to raise prices for international customers to maintain profitability. Shanghai futures exchange (SHFE) HRC futures (January contract) inched up by RMB 37/t ($5/t) w-o-w to RMB 3,248/t ($461/t) from RMB 3,211/t ($455/t) a week ago.

5.Domestic rebar rise w-o-w: Chinese rebar offers up by RMB 40/t ($6/t) w-o-w to RMB 3,350/t ($475/t) as compared to RMB 3,310/t ($469/t) previous week following the uptrend in SHFE futures. SHFE rebar futures (January contract) increased by RMB 36/t ($5/t) w-o-w to RMB 3,194/t ($453/t) from RMB 3,158/t ($448/t) last week.

China's rebar production stood at 129.685 mnt in Jan-Aug'24, down 15.7% y-o-y, according to NBS. Moreover, in Aug'24, rebar production fell 32.3% y-o-y to 12.553 mnt.

Outlook

The Chinese steel market is currently experiencing a period of volatility. As participants return from holidays, demand has slowed down, leading to a cautious wait-and-see approach among market participants. However, the rising export offers for HRC indicate a potential increase in exports, which could support domestic prices in the near future.