China Weekly: Steel prices show uptrend with rise in SHFE futures
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The Chinese steel market experienced a significant uptick, largely mirroring the rise in Shanghai Futures Exchange (SHFE) prices. Domestic steel product prices, including billet, hot-rolled coil (HRC), and rebar, saw w-o-w increases. Iron ore prices also experienced a slight upward trend, while coking coal prices remained relatively stable.
1. Iron ore spot prices climb $4/t w-o-w: The benchmark iron ore fines price rose w-o-w by $4/t to $100/t CFR China on 30 August 2024 amid improved trading activity. Steel mill production levels slowly recovered, leading to improved market sentiment and buying interest. Market participants are shifting their preference towards October loading cargoes. Additionally, the market's focus on factors such as steel mill margins, the peak steel demand season, and low inventory levels for finished steel for the near-term recovery in both steel and iron ore prices.
Iron ore inventories at China's major ports rose by 1.6 million tonnes (mnt) to 150.8 mnt on 29 August, compared to the previous week, according to SteelHome data.
a) Spot pellet premium inches down: Spot pellet premium for Fe 65% grade pellets edged down by $0.20/t at $16.90/t CFR China on 28 August.
b) Spot lump premium edges down: Spot lump premium dipped by $0.001/dmtu at $0.1540/dmtu on 30 August.
2. Coking coal prices remain stable: Coking coal prices has been largely stable at $198/t FOB. Most of the buyers preferred to remain on sidelines to witness the change in prices.
3. Chinese billet prices rise w-o-w: Billet prices in Tangshan rose by RMB 60/t ($8/t) w-o-w to RMB 2,960/t ($417/t) (inclusive of 13% VAT) on 30 August. The volatility in raw material prices, finished steel prices, and rebar futures along with improved demand leading to decline in inventories have supported billet prices this week. Meanwhile, SHFE rebar futures (October 2024 delivery) increased by RMB 68/t ($10/t) w-o-w to RMB 3,222/t ($454/t) on 30 August.
4.Domestic HRC offers increase: China's HRC offers increased by RMB 60/t ($8/t) w-o-w to RMB 3,220/t ($454/t) from RMB 3,160/t ($446/t) previous week, following the rise in SHFE HRC futures (October contract) prices driven by a positive shift in market sentiment. SHFE HRC futures rose by RMB 106/t ($15/t) w-o-w to RMB 3,346/t ($472/t) against RMB 3,240/t ($457/t) last week. Furthermore, Chinese HRC export offers rose by $10/t w-o-w to $465/t as compared to $455/t a week ago.
5.Domestic rebar offers rise w-o-w: China's domestic rebar offers up by RMB 100/t ($14/t) w-o-w to RMB 3,300/t ($465/t) against RMB 3,200/t ($451/t) a week ago due to a surge in demand that was fuelled by rising futures prices. SHFE rebar futures for the October contract rose by RMB 63/t ($9/t) w-o-w to RMB 3,243/t ($457/t) from RMB 3,180/t ($449/t) last week.
Outlook
Chinese steel prices are expected to continue their upward trajectory in the near term driven by increasing demand for steel products. The increase in domestic steel product prices is likely to persist due to strong demand and rising raw material costs. However, it is crucial to monitor the impact of global economic conditions and potential policy changes on the Chinese steel market, as these factors could influence the market's future direction.