China weekly: Steel prices trend higher amid rising SHFE futures; outlook mix

Domestic steel prices in China rose w-o-w amid a hike in SHFE futures of HRCs and rebars. Spot iron prices remain range-bound this week, while coking coal and billet prices climbed w-o-w. Domestic HRC prices continued their uptrend this week, whereas, rebar prices edged down w-o-w.

Product-wise sentiments

1. China spot iron ore prices range-bound w-o-w: Chinese spot iron ore fines Fe 62% prices stood at $115.35/t CNF China on 21 July, almost stable with a slight dip of $0.45/t w-o-w against $115.8/t CNF China in the previous week. Buying interest dwindled in the seaborne market and both seaborne and north China portside markets saw a decline in buying activity after hearing about the Tangshan production drop.

According to SteelHome data, iron ore inventory at major Chinese ports decreased by 0.5 million tonnes (mnt) to 122.8 mnt on 20 July 2023 compared to the previous week.

a) Spot pellet premium edges down w-o-w: Spot pellet premium for Fe 65% grade pellets inched down by $0.15/t to $17.30/t on 20 July compared to the previous week.

b) Spot lump premium falls w-o-w: Spot lump premium stood at $0.1395/dmtu on 21 July, decreasing by $0.0105/dmtu compared to last week.

2. Coking coal prices rise w-o-w: Coking coal prices rose by $5/t w-o-w to $237/t FOB on 22 July against $231/t FOB last week amid strong buying interest from China.

3. Chinese billet prices rise towards weekend: Billet prices in China's Tangshan increased w-o-w by RMB 40/t ($6/t) to RMB 3,600/t ($501/t), including 13% VAT, on 21 July. Improved demand in the domestic market and hike in rebar futures as well as finished steel prices kept billet prices supported.

4. Domestic HRC prices increase: Domestic HRC prices increased by RMB 30/t ($4/t) w-o-w to RMB 3,850/t ($536/t) against RMB 3820/t ($532/t) a week ago. Prices increased amid rise in SHFE HRC futures. The settled price of SHFE HRC futures (October contract) increased by RMB 50/t ($7/t) w-o-w to RMB 3,898/t ($542/t) on 21 July as against RMB 3,848/t ($535/t) a week ago.

China's HRC export offers increased by $5/t w-o-w to $555/t FOB Rizhao as against $550/t FOB last week. China's National Development and Reform Commission (NDRC) has announced plans to introduce measures to improve demand in the country, following below-expectation economic data and lowered GDP growth forecasts. Following the announcement, domestic demand rose, which resulted in an increase in export offers.

5. Rebar prices edge down: Chinese rebar prices edged down by RMB 20/t ($3/t) w-o-w to RMB 3,800/t ($528/t) on 21 July against RMB 3,820/t ($532/t) a week ago. SHFE rebar futures (October contract) settled at RMB 3,780/t ($525/t) on 21 July, up RMB 32/t ($5/t) against RMB 3,748/t ($522/t) a week ago. Rebar prices edged lower as the property and construction sector, the largest consumer of steel, played spoilsport.

6. Shagang Steel trims long steel prices: China's Shagang Steel cut long steel prices by RMB 100/t ($14/t) for late-July sales. Effective prices-

• Rebars (16-25 mm): RMB 3,870/t ($540/t)
  
  
• Wire rods (6-10 mm): RMB 4,010/t ($559/t)
  
  
• Coiled rebars (8-10 mm): RMB 4,100/t ($572/t)
  
  
• All prices are ex-mill, including VAT, with effect from 21 July.
  
  

Outlook: The supply-demand situation is expected to remain tight. There is still a scope of improvement in demand from the construction as well as property sector. The government is also expected to introduce measures to stimulate the economy, which could support steel demand.