China weekly: Steel prices surge amidst rising futures and production cuts
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Steel prices in China rose w-o-w amid an increase in Shanghai Futures Exchange (SHFE) futures. In addition, declining Chinese steel inventory amid production cuts and stimulus government measures to control output has led to an increase in prices.
Total steel inventory at the China Iron and Steel Association (CISA)-affiliated mills declined by 2.74 million tonnes (mnt), or 16.6%, to 13.771 mnt in late-October 2023 compared with 16.531 mnt in mid-October. Moreover, inventories decreased by 1.476 mnt, or 9.68%, m-o-m as against 15.247 mnt in late-September 2023. In addition, the same fell by 2.702 mnt, or 16.4%, y-o-y compared with 16.473 mnt in late-October 2022.
The average daily crude steel output of CISA-affiliated mills stood at 1.924 mnt in late-October 2023, down by 5.65% from 2.039 mnt in mid-October 2023. Also, output went down by 6.9% m-o-m against 2.066 mnt in late-September 2023. Moreover, output dropped by 5.19% y-o-y.
China steel exports: Steel exports continued to rise during January-October 2023, according to the China's General Administration of Customs. Export volumes during first 10 months of 2023 rose by 34.8% y-o-y to 74.732 mnt against 55.45 mnt during the same period in 2022. In October 2023, steel exports rose by 53.1% y-o-y to 7.94 mnt against 5.18 mnt in October 2022. However, the same declined by 2% m-o-m against 8.28 mnt during the previous month.
Product-wise sentiments
1. Iron ore spot prices rise w-o-w: The benchmark Fe 62% fines index increased by $3/t w-o-w to $129.8/t CFR China on 10 November. Iron ore prices went up due to increased operational rates at Chinese steel mills and stronger steel demand. As per reports, despite the limited seaborne trading activities the iron ore market retained its relatively strong confidence.
Iron ore inventory at major Chinese ports increased by 1.8 mnt to 108.8 mnt on 10 November compared to the previous week, according to SteelHome data.
a) Spot pellet premium up w-o-w: Spot pellet premium for Fe 65% grade pellets rose by $0.65/t to $22.3/t on 10 November, compared to the previous week.
b) Spot lump premium rises w-o-w: Spot lump premium increased by $0.0045 w-o-w to $0.2485/dmtu on 10 November.
2. Coking coal prices fall w-o-w: Coking coal prices fell sharply by 15% w-o-w at $298/t FOB on 11 November 2023 amid increased spot availability
3. Chinese billet prices rise by RMB 90/t w-o-w: Chinese billet prices rose w-o-w by RMB 90/t ($12/t) to RMB 3,630/t ($498/t) on 10 November. Hike in raw material prices, decreasing inventories, along with hike in rebar futures, has supported billet prices. Meanwhile, Chinese SHFE rebar futures increased by RMB 74/t (10/t) w-o-w to RMB 3,879/t ($532/t).
4. Domestic HRC prices increase w-o-w: Domestic HRC prices increased by RMB 40/t ($5/t) w-o-w to RMB 3,870/t ($531/t) against RMB 3,830/t ($525/t) a week ago. Prices increased in line with rising SHFE HRC futures. In addition, market sentiment boosted by a decline in inventories and stimulus measures by government to control output is causing a rapid decline in capacity on the supply side.
China's HRC export offers also increased by $15/t w-o-w to $545/t FOB Rizhao as against $530/t FOB last week. The SHFE HRC futures (January contract) sharply rose by RMB 92/t ($13/t) w-o-w to RMB 3,976/t ($545/t) on 10 November as against RMB 3,884/t ($533/t) a week ago.
5. Rebar prices surge w-o-w: Chinese rebar surged by RMB 110/t ($15/t) w-o-w to RMB 3,890/t ($533/t) as against RMB 3,780/t ($518/t) a week ago. SHFE rebar futures (January contract) settled at RMB 3,870/t ($530/t) on 10 November, up RMB 87/t ($12/t) against RMB 3,783/t ($519/t) a week ago. Rebar prices were higher, in response to concerns among market participants regarding potential production cuts at blast furnace mills.
6. Baosteel raises HRC prices: World's top steelmaker, Baosteel has raised HRC prices for Dec'23 sales by RMB 100/t ($14/t) m-o-m, sources informed SteelMint. Prices of thick plates increased by RMB 50/t ($7/t) m-o-m. The company increased prices amid rise in Chinese domestic prices and SHFE HRC futures over the last couple of weeks owing to production cuts and government stimulus measures.
7. Shagang increases scrap purchase prices: Shagang Steel has increased ferrous scrap purchase prices by RMB 50/t ($7/t) for all grades of scrap. Post-revision, HMS (6-10 mm) prices stood at RMB 2,910/t ($400/t) delivered to headquarters, including 13% VAT, effective from 9 November.
Outlook:
The outlook for the Chinese steel prices is expected to remain strong due to decent domestic demand expected. It is also expected that the number of mills undergoing maintenance and production cuts will continue to increase, and prices will improve further to ease the contradiction between supply and demand.
