Chinese Steel Market Highlights

Chinese steel prices witnessed rebound due to active trades post-Labour day holidays (1 May until 5 May). Thus increasing futures and a slight pickup in demand resulted in an uptrend in prices.

-- HRC and rebar export offers remained largely stable after holidays. Spot iron ore prices picked up on supply concerns from Brazilian suppliers. Coking coal prices moved up marginally this week.

-- As per the data released by the General Administration of China's Customs (GAC), the nation's steel exports during the first 4 months of CY'20 (Jan-Apr'20) fell by 11.7% Y-o-Y to 20.6 MnT.

--Also nation's steel imports registered 7.4% of growth yearly basis to 4.1 MnT in Jan- Apr'20.

-- Further, the nation's iron ore imports increased by 13% in Apr'20 to 97.27 MnT when compared with 85.91 MnT a month ago.

Spot iron ore prices picked up on the week-

-- Chinese spot iron ore prices opened up this week at USD 83.95/MT, CFR China, and stood almost stable for the week. However, the prices picked up yesterday (8th May'20) to USD 88.45/MT, CFR China. These price levels were last seen in mid-Mar '20 and thus prices have hit over 1.5 months high. Due to the 5 days long Labour Day holidays in China starting from 1st May'20, witnessed stability in iron ore prices for the week at around USD 84/MT, CFR China.

-- Few market sources shared that prices gained momentum since Brazilian suppliers expected that exports will be affected amid lockdowns in the South American country.

-- As per data compiled by SteelHome consultancy, Iron ore inventory at major Chinese ports dropped to 112. 95 MnT as against 115.65 MnT assessed a week ago.

Spot pellet premium- Fe 65% grade pellets assessed at USD 25/MT, CFR China this week down on a weekly basis as compared to USD 26.35/MT, CFR China last week.

Spot lump premium-Witnessed at 0.1885/dmtu this week stable W-o-W. There is a limited spread between pellets and lumps presently and with low steel margins, there is no cost-benefit in switching to lumps.

Coking coal prices rise marginally-

-- Seaborne coking coal prices moved up slightly this week as the news spread that mining production will halt in Queensland.

-- Chinese market participants remained cautious as the country's port policies have turned stricter after the Labor Day holidays.

-- Pessimistic demand outlook continues in the Indian market as automotive plants and construction projects have ceased operations. Meanwhile, Indian steel producers have started to offer surplus coking coal supplies into the Chinese spot market.

-- The latest offer for the Premium HCC grade is assessed at around USD 112.00/MT FoB Australia in comparison to USD 109/MT FoB basis in the previous week.

Domestic billet price increases weekly basis-

-- The domestic billet prices in China are at RMB 3,140/MT ex Tangshan (including VAT), up to RMB 60, against last week. The country continued to book billets from Iran, India etc.

--A trade source mentioned to SteelMint. "At these price levels, the marketers can enjoy decent profit margins however in the near term, the market could witness a downtrend, as there would be bountiful inventory levels in China."

Increased appetite for HRC imports, in turn, weighs on nation's export offers-

-- Indian steel mills have collectively booked around 2,00,000-2,25,000 MT of HRC to China and Vietnam recently, SteelMint learned from its credible sources. The deals have been concluded at around USD 388-390/MT CFR basis for HRC (SAE 1006 and SS400 grade) with shipments scheduled in June end - early July.

--Before this in Apr'20, Chinese steel mills booked around 30,000 MT of HRC from South Korean mill and around 40,000 MT of HRC from India at around USD 395-400/MT CFR basis.

-- The nation's HRC export offers remained unchanged on a weekly basis. Also cheaper HRC offers from India, Russia, and Japan to Vietnam continue to weigh on the nation's HRC export offers.

-- Thus, the current assessed offer stands at USD 400-406/MT FoB China

-- However, the domestic prices surged by RMB 60-90/MT to RMB 3,380-3,390/MT (Eastern China) in contrast with RMB 3,270-3,300/MT (Eastern China) a week ago on rising futures.

Rebar export offers stable despite gains in the domestic market-

-- This week domestic rebar prices despite the uptrend in domestic prices. The current offer stands at USD 438-447/MT FoB China.

--However major steel mills are offering rebar export offers on the higher side which is around USD 455-460/MT FoB China.

-- Domestic rebar prices increased significantly by RMB 90-100/MT and stood at RMB 3,500-3,540/MT (Eastern China) in contrast with RMB 3,410-3,440/MT (Eastern China) a week ago.

Source: SteelMint Research