China weekly: steel prices shows downward trend amid low demand

• Steel inventories at CISA mills rise in early-Mar
  
  
• SHFE steel futures shows downward trend
  
  
• HRC export offers decline by $15/t w-o-w
  
  

Chinese steel prices declined this week amid slow domestic demand. Prices of HRCs, rebar, iron ore, billet, coking coal and met coke saw sharp declines.

The China Iron and Steel Association (CISA) reported that steel inventory of key enterprises in early-March 2024 stood at 19.523 million tonnes (mnt), an increase of 1.504 mnt or 8.35% compared to 18.020 mnt in late-February. Moreover, inventories rose by 3.392 mnt or 21.03% m-o-m compared with 15.100 mnt in early-February.

The average daily crude steel output of CISA-affiliated mills stood at 2.058 mnt in early-March, a decrease of 3.38% from 2.130 mnt in late-February. Also, output inched down by 0.6% m-o-m against 2.070 mnt in mid-February.

1. Iron ore spot prices fall sharply w-o-w: The benchmark iron ore fines price declined by $16.45/t w-o-w to $100.2/ t CFR China on 15 March 2024 due to weak buying interest in the downstream market. Meanwhile, a loss of confidence within the market led to drop in iron ore fines trading. The market remained worried about the decreased steel demand downstream, particularly without any support from the Chinese government. Due to poor production margins and lack of demand from steel mills, both steelmakers and local miners announced a reduction of 30% in operating rates.

Iron ore inventory at major Chinese ports increased by 2.7 mnt to 140.9 mnt on 14 March compared to 7 March, according to SteelHome data.

a) Spot pellet prices edge down w-o-w: Spot pellet premium for Fe 65% grade pellets decreased by $ 0.3/t w-o-w at $12.7/t on 13 March.

b) Spot lump premium up w-o-w: Spot lump premium inched up by 0.004 w-o-w to $0.1430/dmtu on 15 March.

2. Coking coal prices edge down: Coking coal prices dropped by 24% w-o-w to $232/t FOB on 16 March 2024, amid over supply.

3. Chinese billet prices fall sharply w-o-w: Chinese domestic billet prices fell by RMB 120/t ($17/t) w-o-w to RMB 3,310/t ($460/t) on 15 March against 8 March. Drop in finished steel prices and rebar futures have weighed on billet prices. Meanwhile, Chinese SHFE rebar futures edged down by RMB 201/t ($28/t) w-o-w to RMB 3,490/t ($485/t) against 8 March.

4. Domestic HRC prices decline w-o-w: Domestic hot-rolled coil (HRC) prices in China fell by RMB 100/t ($14/t) w-o-w to RMB 3,750/t ($521/t) this week against RMB 3,850/t ($535/t), following the decline in SHFE HRC futures. The decline is attributed to low domestic demand and high production. In addition, SHFE HRC futures (May contract) decreased by RMB 143/t ($20/t) w-o-w reaching RMB 3,699/t ($514/t) on 15 March compared to RMB 3,842 ($534/t) last week. Moreover, Chinese HRC export offers went down by $15/t w-o-w to $540/t this week compared to $555/t in the previous week.

5. Rebar prices fall w-o-w: Chinese rebar prices went down by RMB 140/t ($19/t) w-o-w reaching RMB 3,660/t ($509/t) against RMB 3,800/t ($528/t) last week. Moreover, SHFE futures (May contract) fell by RMB 191/t ($27/t) w-o-w to RMB 3,504 ($487/t) on 15 March compared to RMB 3,695 ($514/t) in the previous week.

This drop is due to a decline in the cost of raw materials and bearish market sentiments. To cope with the situation, many steel mills have decided to cut down on production. These cuts are expected to remain for several weeks.

6. Baosteel keeps HRC prices unchanged: Baosteel has rolled over HRC and CRC prices for April sales, after increasing them in March, according to BigMint sources. Prices remained flat amid low domestic demand. However, prices for hot-dip galvanized (DQ level) increased by RMB 100/t ($14/t). Furthermore, China's SHFE HRC futures showed a mixed trend post-Chinese Lunar New Year holidays.

7. Shagang cuts long steel prices: China's Shagang Steel reduced long steel prices by RMB 100 ($14) for mid-March 2024 sales. Effective prices are thus:

• Rebar (16-25 mm): RMB 4,020/t ($560/t)
  
  
• Wire rods (6-10 mm): RMB 4,170/t ($581/t)
  
  
• Coiled rebars (8-10 mm): RMB 4,160/t ($579/t)
  
  
• All prices are ex-mill, including VAT.
  
  

Outlook

The outlook for Chinese steel prices is bearish for the near future. Rising inventories, falling demand, and a downward trend in steel futures contracts all point towards continued price declines. This is further pressured by a decrease in raw material costs and a global economic slowdown. While some steel mills are cutting production to cope with the situation, this might not be enough to offset the current market sentiments.