Chinese steel prices yet to gain momentum on high inventories
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- Steel inventories at CISA mills increase in mid-February
- SHFE steel futures decline
- HRC export offers remain unchanged
Chinese steel prices showed mixed trends this week amid low demand. Prices of HRC, rebar, coking coal and billet declined w-o-w, whereas iron ore prices inched up w-o-w. The decline in prices can be attributed to low domestic demand.
The China Iron and Steel Association (CISA) reported steel inventory of key enterprises in late-February 2024 stood at 18.020 million tonnes (mnt), a decrease of 959,000 tonnes (t) or 5.05% compared to 18.978 mnt in mid-February. Moreover, inventories rose by 5.82 mnt or 47.71% m-o-m compared with 12.199 mnt in late-January.
The average daily crude steel output of CISA-affiliated mills stood at 2.130 mnt in late-February, an increase of 1.43% from 2.100 mnt in mid-February. Also, output rose by 5.7% m-o-m against 2.016 mnt in late-January.
1.Iron ore spot prices up w-o-w: Benchmark iron ore fines prices inched up by $1.25/t w-o-w to $116.65/ t CFR China on 8 March 2024. Steel mill production margins have slightly improved, which shifted mills' focus to buying medium and high-grade iron ore cargoes. However, weak downstream steel demand and low operation rates along with maintenance shutdown by some mills have also affected prices. Some reports claimed the discount rate is supported, considering the cost-effectiveness of using lower-grade fines.
Iron ore inventory at major Chinese ports increased by 3.3 mnt to 138.2 mnt on 7 March compared to 29 February, according to SteelHome data.
a) Spot pellet prices edge down w-o-w: Spot pellet premium for Fe 65% grade pellets decreased by $ 0.25/t w-o-w to $13/t on 6 March.
b) Spot lump premium rises w-o-w: Spot lump premium increased by 0.011 w-o-w to $0.1390/dmtu on 8 March.
2.Coking coal prices edge down: Coking coal prices dropped by 3% w-o-w to $304/t FOB on 9 March 2024, amid sufficient material availability.
3.Chinese billet prices decline w-o-w: Chinese domestic billet prices dipped by RMB 60/t ($8/t) w-o-w to RMB 3,460/t ($481/t) on 8 March, 2024. Drop in rebar futures, finished steel prices, and volatility in raw material prices have put pressure on billet prices. Meanwhile, Chinese SHFE rebar futures sharply decreased by RMB 72/t ($10/t) w-o-w to RMB 3,691/t ($514/t) on 8 March, 2024.
4.Domestic HRC prices decline w-o-w: Domestic hot-rolled coil (HRC) prices in China fell by RMB 70/t ($9/t) w-o-w to RMB 3,850/t ($535/t) this week against RMB 3,920/t ($545/t), following the decline in SHFE HRC Futures. Furthermore, the stocks of HRC have been increasing despite low domestic demand. In addition, SHFE HRC futures (May contract) decreased by RMB 68/t ($10/t) w-o-w reaching RMB 3,842/t ($544/t) on 8 March compared to RMB 3,910 ($544/t) last week.
Chinese HRC export offers remained stable w-o-w at $555/t this week. However, China's steel exports saw a significant increase of 32.6% y-o-y in the first two months of 2024, reaching 15.91 million tonnes (mnt).
5.Rebar prices fall w-o-w: Chinese rebar prices went down by RMB 30/t ($4/t) w-o-w reaching RMB 3,820/t ($531/t) against RMB 3,850/t ($535/t) in last week. Prices fell amid lower demand and falling futures. Moreover, SHFE futures (May contract) fell by RMB 93/t ($13/t) w-o-w to RMB 3,695 ($514/t) on 8 March compared to RMB 3,788/t ($527/t) in previous week.
Outlook:
The Chinese steel market is bouncing back post-seasonal slowdown. With the Spring Festival behind and warmer weather on the horizon, construction is ramping up again. Migrant workers are filtering back, and projects that were on hold are getting underway again. However, the pick-up in demand isn't happening everywhere at the same pace. Some areas are seeing a faster return to activity than others.
