Chinese steel prices show mixed trend during holidays even as SHFE futures decline

• Steel inventories at CISA mills drop in late-Jan'24
  
  
• Low purchasing activity during CNY holidays
  
  
• HRC export offers fall w-o-w
  
  

Chinese steel prices showed a mixed trend this week before the Lunar New Year holidays. Spot iron ore and HRC prices inched up, whereas billet and rebar prices remained unchanged. However, coking coal prices witnessed a w-o-w decline.

The China Iron and Steel Industry Association (CISA) reported steel inventory of key steel enterprises in late-January 2024 at 12.199 million tonnes (mnt), down 3.155 mnt or 20.55% against 15.354 mnt in mid-January.

The average daily crude steel output of CISA-affiliated mills stood at 2.0166 mnt in late-January, down 3.69% from 2.093 mnt in mid-January. Also, the output rose by 21% m-o-m as against 1.666 mnt in late-December.

Product-wise sentiments

1.Iron ore spot prices inch up w-o-w: The benchmark iron ore fines price inched up by $1/t w-o-w to $129/ t CFR China on 9 February. However, concerns arose regarding the market trend following the onset of the Lunar New Year holidays. The market witnessed fewer buyers with the rapidly approaching Lunar holidays in China which started 9 February.

Demand from mills was barely seen because most of them had taken holiday off or had begun their vacation maintenance on blast furnaces. Due to the holiday season, the majority of steel mills in China were taking a break resulting in anticipated low purchase activity in the coming days.

Iron ore inventory at major Chinese ports increased by 1.65 mnt to 126.25 mnt on 6 February compared to 30 January, according to SteelHome data.

a) Spot pellet premium stable w-o-w: Spot pellet premium for Fe 65% grade pellets remained stable w-o-w at $14.3/t on 7 February.

b) Spot lump premium stable w-o-w: Spot lump premium remained largely stable w-o-w at $0.1325/dmtu on 9 February.

2. Coking coal prices edge down w-o-w: coking coal prices dropped by 2% w-o-w to $316/t FOB on 10 February, 2024 amid reduced offer levels.

3.Chinese billet prices remain stable: Chinese domestic billet prices remained stable w-o-w at RMB 3,550/t ($498/t) on 9 Feb'24. Volatility in finished steel prices, fall in raw material prices and lower trades throughout the week ahead of Lunar New Year holidays continued to put pressure on billet prices. However, Chinese SHFE rebar futures increased w-o-w by RMB 29/t ($4/t) to RMB 3,854/t ($541/t) on 9 Feb'24.

4. Domestic HRC prices inch up w-o-w: Domestic hot-rolled coil (HRC) prices in China inched up by RMB 10/t ($1/t) w-o-w, reaching RMB 3980/t ($553/t) in the current week, compared to RMB 3,970 /t ($552/t) in the previous week, despite of fall in SHFE futures and Lunar New Year holidays. The SHFE HRC futures (May contract) fell by RMB 27/t ($4) w-o-w, reaching RMB 3,978/t ($553/t) on 8 February. Moreover, Chinese HRC export offers fell by $10/t w-o-w to $565/t.

5. Rebar prices remain flat w-o-w: Chinese rebar prices remained stable w-o-w, at RMB 3,880/t ($539/t) compared. SHFE rebar futures (May contract) decreased by RMB 22/t ($3/t) to RMB 3,849/t ($535/t) on 8 February. China's rebar prices remained flat as trading of rebar is suspended as many already started their Lunar New Year leading to less construction activity.

Outlook:

There are some positive indicators, while concerns remain due to the upcoming holidays and volatility in the market. Mills are optimistic that HRC export offers may rebound post holidays. The Lunar New Year holidays are from 10-17 February. However, Chinese market participants may not be fully active till end-February, sources informed.