Global steel prices fall further in Mar'24; will Chinese price recovery sustain?

• Chinese HRC export offers drop to 4-month low
  
  
• Iron ore falls amid lack of Chinese appetite
  
  
• Post-Lunar dullness, falling scrap prices hit longs
  
  

Morning Brief: Global steel prices fell further m-o-m in March 2024, reveals data maintained with BigMint.

Chinese HRC export offers dropped by $18/tonne (t) or 3% to $545/t in March 2024 against ($563/t in February). These offers are at a four-month low. Japanese HRC offers took cue from China and fell $15/t or 2.5% to $585/t ($600/t) while Indian mills, saw their offers eroding by $11/t or 2% to $586/t ($597/t). The BigMint HRC export index fell to a 7-month low on 19 March.

In longs, Turkiye's rebar fell 3% to $597/t ($613/t). Black Sea billet export offers, which had bucked the trend in February, failed to retain the momentum in March, dropping to $508/t ($519/t), losing 2%.

All prices are on FOB basis.

In raw materials, the downtrend was across the board as well. The Fe62% iron ore fines, CFR China, dropped the steepest, 11%, to $112/t ($126/t), while the premium HCC coking coal from Australia, CFR India, eroded 5% or $18/t to $314/t ($332/t).

HMS 80:20 scrap, CFR Turkiye, declined by a steep $35/t or 8% to $380/t ($415/t) in the month under review.

Factors that led to the price downtrend in Mar'24

Weak global demand for flats blunts prices: Weakened global demand for flat products dampened offers from China, India and other HRC exporting countries like Japan. Declining demand from Vietnam, China's key exporting market in Southeast Asia, dulled the latter's offers. Another key and emerging HRC guzzling region is the Middle East. But, here too buyers have retreated thanks to Ramadan, the holy month of fasting in the Islamic calendar. China's own relentless slack home demand also pushed export offers lower. The expected turnaround in demand post-Lunar holidays did not materialise, disappointing mills in China and elsewhere. Leading mills Baosteel, Taiwan's CSC and Tokyo Steel rolled over domestic prices in March.

The European Union, which has become a key market for Indian mills, has also been gloomy for months despite showing some flickers of revival in-between. There has been a lull in residential construction activities in northern Europe. The overall dull demand trend has blunted EU's domestic prices too. Buyers are not willing to build stockpiles but would rather live hand-to-mouth, anticipating prices to fall further.

Longs hit by lower scrap prices, post-Lunar dullness: Longs fared poorly too in March. First, Turkish rebars struggled in markets where it was once dominant. Asian, GCC and North African exporters have captured such markets, the EU being one.

Secondly, imported scrap prices have been falling, further depressing rebar export offers. Thirdly, With China's disappointing post-Lunar holiday revival, mills here became aggressive in rebar exports too, driving other rebar exporting countries - Japan, Korea, Vietnam and Taiwan -- to adopt a similar stance.

Black Sea billets also lost steam in March on the back of falling global imported scrap prices. Two, buyers have been resisting current offers, expecting these to fall further, leading to offer-bid disparities. Three, the overall bearish global finished steel demand sentiments weighed on rebars and billets. Lastly, weak demand from the Chinese market post-Lunar New Year holidays also impacted billets.

Iron ore falls amid Chinese realty woes: Chinese spot iron ore prices hit a 10-month low while Chinese portside inventories increased to one-year high to around 141 mnt on 13 March. Iron ore (Fe 62%) fines spot prices dropped sharply to around $100/t CFR China on 18 March due to weak buying interest amid poor downstream steel demand. The Chinese real estate sector is in deep trouble with two giants, Evergrande and Country Garden, in dire financial straits. The recent National People's Congress indicated that realty developers may not receive significant bailouts. There are talks that some infrastructure projects may get cancelled due to lack of funding, a rumour that may escalate Chinese construction steel exports.

However, the fall in iron ore prices may help Chinese mills to cut their losses to some extent.

Coking coal prices weighed down by low steel demand: The drop in Premium Hard Coking Coal (PHCC) prices, CNF India, can be attributed to several factors. Weak steel demand globally, particularly in India and China, have resulted in reduced demand in spot markets, leading to an oversupply scenario. The supply glut has empowered end-users with increased bargaining power, thereby exerting downward pressure on prices.

Moreover, Indian steelmakers have become cautious ahead of the financial year-end and the general elections. A certain amount of liquidity crunch is contributing to the cautious stance and downtrend in steel prices too. Additionally, price cuts in the domestic Premium Low-Vol (PLV) coal market in China have further exacerbated the situation by impacting international prices.

Weak supplier markets keep scrap prices down: Turkish imported ferrous scrap prices declined sharply, driven by weakening supplier markets, especially the US. Decent scrap volumes generated in the US led to higher tonnages for exports at softer prices. Plus, HRC prices dropped in the US, which further pressured down scrap. Secondly, collection costs in Europe eased with winter in receding mode, contributing to the lower scrap prices. While scrap collectors initially resisted the price reductions in February, they eventually had to adjust due to low steel demand. This led to negotiations favouring Turkish mills, who secured lower prices amid the challenging market conditions.

Outlook

Chinese SHFE futures have started rising since the last few days, which pushed up HRC export offers by $5/t. But will these offers sustain, considering that global finished steel demand is still sluggish and the expected rate cuts from central banks are still elusive?