Chinese Steel Market Highlights- Week 26, 2019

This week Chinese steel market showed uptrend in steel prices post announcement of production cuts in Tanghshan region by 20-50% on blast furnaces in order to curb air pollution and control excess capacities produced by steelmakers in China.

According to the notification issued, steelmakers that are categorized as Grade A or located along the coast are required to cut capacity of sintering and pelletising machines, blast furnaces, converters, and lime kilns by 20%, while other mills in the region will face cuts of at least 50% until 1st Aug'19.

Nation's HRC and rebar export offers witnessed uptrend over gains in domestic market. Iron ore prices also picked up towards the weekend. Billet domestic offers reported surge. However coking coal offers reported fall over weak demand from overseas buyers.

Meanwhile China's Shagang Steel to raise scrap purchase price by RMB 70-100 (USD10-15) amid tight supply.

Chinese spot iron ore prices moved up towards weekend- Chinese spot iron ore prices opened up this week at USD 116.30/MT, fell during the week to around to USD 113.75/MT, CFR China,as on 25th June'19 and later picked up to USD 117.95/MT towards weekend.

The global iron ore prices have depicted fall during mid week amid easing supply from Vale and decreasing demand from Chinese mills. Meanwhile Tangshan govt's announcement for reducing production till 1 Aug'19 adhering to pollution norms; it is expected that steel mills will have higher iron ore inventories following which global iron ore miners turned active to offload cargoes. However, later towards weekend prices moved up.

As per data compiled by SteelHome consultancy, iron ore inventory at major Chinese ports dropped to 115.25 MnT this week as compared to 116.75 MnT a week ago.

Spot lump premium drop week-on-week- Spot lump premium dropped down to 0.3400/DMTU, as against USD 0.3601/DMTU.

Spot pellet premium moves down amid thin margins- Spot pellet premium for Fe 65% grade pellets assessed at USD 23.25/MT as against USD 23.95/MT CFR China a week ago.

Pellet inventory at major Chinese ports fell for the week to 5.05 MnT as compared to 5.25 MnT towards end of last week. Preference for pellet and lump is expected to increase amid imposition of sintering control in Tangshan.

Coking coal offers witness continual decline over bearish outlook- Seaborne premium low-volatile hard coking coal prices remained under pressure amid seasonally weak demand.

However tight supply of hard coking coal will offset the further fall in prices from Australia. Meanwhile demand from Indian buyers also remained subdued amid approaching monsoon season.

Latest offers for the Premium HCC grade are assessed at around USD 195.00/MT FOB Australia as compared to USD 197/MT in previous week.

China's domestic billet prices shoot up amid announced production cuts in Tangshan- This week Chinese domestic billet prices settled at RMB 3,620/MT, surged RMB 160 against last week.

According to SteelMint assessment, the prime reason for such a towering rise is 20-50% steel & sintering production cut in Tangshan until 1st Aug targeted to curb air pollution. Also, this week's capacity utilization rate is reported to slow down by 2.39% in Tangshan against last week. Another reason for this high rise in billet prices is expected calm in US-China trade war.

Chinese HRC export offers surge over gains in domestic market- Chinese HRC exports offers started to gain upward momentum over bullish market sentiments both in export and overseas market.

Currently nation's HRC export offer surged by USD 15-20/MT W-o-W basis and stands at USD 500-505/MT FoB basis against USD 480-490/MT FoB basis in preceding week.

On weekly basis domestic HRC prices in China stood at RMB 3,920-3,940/MT in eastern China (Shanghai) this week; upsurged by RMB 140/MT which was RMB 3,780-3,800/MT in eastern China (Shanghai) in previous week.

Nation's steel prices boosted as Chinese govt announced production cuts in Tanghshan region by 20-50% on blast furnaces. This notice on suspension and limit of production of steel enterprises was circulated in order to control emission and curb air pollution.

Post announcement steel futures remain strong which resulted to gains in domestic market following upside in export offers to overseas buyers.

Thus exporters are planning to replenish inventories in anticipation of further upturn in steel prices from China.

Chinese rebar export offers move up amid strong futures- Chinese rebar exports offers rose amid gains in futures market on the back of announced reduction in output. This resulted to strengthening domestic prices and in turn led to uptrend in export offers from China.

Currently nation's rebar export offers registered at USD 507-512/MT FoB China moved up USD 12-15/MT against previous week.Last week the offers were at USD 495-500/MT FoB basis.

Meanwhile domestic rebar prices stood at RMB 3,960-4,000/MT (Eastern China) spiked by RMB 130/MT W-o-W basis which was RMB 3,830-3,870/MT (Eastern China).

However competitive offers from other exporting nations lead to thin trades of rebar in export market.

Also inventory levels of rebar continued to remain on higher side amid slowdown in construction activities. However recent production cuts may ease inventories and boost rebar prices in domestic market.

Chinese Steel Market Highlights - Week 26, 2019

Source: SteelMint Research