China weekly: Steel prices trend lower post holidays, SHFE futures decline
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- Steel inventories at CISA mills increase in mid-February
- SHFE steel futures decline w-o-w
- Low purchasing activity post-CNY holidays
Chinese steel prices showed downward trend this week post Lunar New Year holidays. Prices of HRC, iron ore, billet and rebar declined w-o-w. whereas, coking coal prices remained unchanged.
The China Iron and Steel Association (CISA) reported steel inventory of key enterprises in mid-February 2024 at 18.978 million tonnes (mnt), an increase of 2.8472 mnt or 17.65% compared to 15.100 mnt in early-February.
The average daily crude steel output of CISA-affiliated mills stood at 2.100 mnt in mid-February, an increase of 1.50% from 2.070 mnt in early-February. Also, output rose by 0.3% m-o-m against 2.093 mnt in mid-January.
1.Iron ore prices decline w-o-w: The benchmark iron ore fines price fell by $8.9/t w-o-w to $121.1/ t CFR China on 23 February after the CNY holidays due to lower production margins of steel mills, lower restocking activities plus market participants adopting a wait-and-watch approach. However, prices in the future will be influenced by how quickly destocking occurs as port inventories are expected to rise.
Iron ore inventory at major Chinese ports increased by 2.8 mnt to 133.1 mnt on 22 February compared to 15 February, according to SteelHome data.
a) Pellet prices fall w-o-w: Spot pellet premium for Fe 65% grade pellets decreased by $ 0.8/t w-o-w at $13.55/t on 21 February.
b) Spot lump premium stable: Spot lump premium remained largely stable w-o-w at $0.1300/dmtu on 23 February.
2.Coking coal prices edge down: Coking coal prices remained unchanged w-o-w at $314/t FOB on 24 February.
3.Chinese billet prices head south post-CNY holidays: Chinese billet prices declined by RMB 80/t ($11/t) to RMB 3,550/t ($493/t) on 23 February against 19 February. Lower trade resulted in higher inventories, and volatility in finished steel prices and rebar futures weighed on billet prices. Meanwhile, Chinese SHFE rebar futures decreased by RMB 18/t ($2/t) to RMB 3,790/t ($527/t) on 23 February against 19 February.
4.Domestic HRC prices fall w-o-w: Domestic hot-rolled coil (HRC) prices in China fell by RMB 60/t ($8/t) w-o-w, reaching RMB 3,920/t ($545/t) this week, compared to RMB 3,980 /t ($553/t) before the Lunar New Year holidays, following the decline in SHFE Futures. The SHFE HRC futures (May contract) decreased by RMB 67/t ($9) w-o-w, reaching RMB 3,911/t ($544/t) on 23 February. Moreover, Chinese HRC export offers dropped w-o-w to $560/t in the late week.
Despite markets reopening nationwide, demand remains sluggish due to cold weather and holidays. Rising inventories and supply-demand pressure fuel cautiousness among traders, leading to a fragile market sentiment.
5.Rebar prices decline w-o-w: Chinese rebar prices declined by RMB 30/t ($4/t) w-o-w reaching RMB 3,850/t ($535/t) against RMB 3,880/t ($539/t) before Lunar New Year Holiday. SHFE rebar futures (May contract) decreased by RMB 51/t ($7/t) to RMB 3,798/t ($528/t) on 23 February. The decline is due to the impact of cold wave, rain, snow, freezing weather and the Spring Festival. These factors have led to sluggish market activity in many places.
Outlook:
Chinese steel prices are likely to remain subdued, with continued downward pressure due to high inventories, weak demand, and declining futures prices. However, government stimulus and potential iron ore price rebound could provide some support in the long term.
