Global steel prices fall m-o-m in Feb'24; what lies ahead?

• Sluggish global markets keep HRC, rebar prices depressed
  
  
• Black Sea billets see opportunity in Red Sea disruptions
  
  
• Easing inflation may boost global economies again
  
  

Morning Brief: Global steel prices predominantly showed a downtrend in February 2024 m-o-m, even if the declines were moderate to slight, reveals data maintained with BigMint. Only billets resisted the trend.

Chinese HRC offers dropped by $11/t to $563/tonne ($574/t in January, 2024). Japanese HRC offers fell by $10/t to $600/t ($610/t) while Indian mills, which had re-entered the market in January, after a three-month gap, saw their offers dipping marginally to $597/t ($601/t).

Turkiye's rebar lost $2/t to $613/t (615/t). However, Black Sea billet export offers rose $7/t to $519/t ($512/t).

All prices were on FOB basis.

In raw materials, the downtrend was across the board. The Fe62% iron ore fines, CFR China, dropped $9/t or 7% to $126/t ($135/t), while the premium HCC coking coal from Australia, CFR India, fell 4% or $15/t to $332/t ($347/t).

HMS 80:20 scrap, CFR Turkiye, dipped slightly by around 2% to $414/t ($421/t) in the month under review.

Factors that influenced global steel, raw material prices in Feb'24

China offers lose sheen amid Lunar celebrations: The Chinese Lunar New Year holidays injected a fresh dose of lull in an already sluggish global market. Export offers were equally dull, riding domestic sentiments. Vietnam, China's largest market for HRCs, was also in holiday mood amidst the TET festival. Under such circumstances, leading Vietnamese mill Formosa Ha Tinh cut HRC offers by a steep $45/t and Hoa Phat by $30/t for April/May shipments while Chinese offers to Vietnam dropped by $10/t m-o-m to around $600/t CFR in February.

Indian export offers stagnate: Indian mills were also unable to make much headway in a colourless exports market. Importantly, the EU market turned slow after exhaustion of quotas for Q1 and buyers are wary because of lack of clarity on Q2 portions. Secondly, the market buzz is EU's domestic prices may fall, making buyers move to the sidelines. "EU importers are hesitant to book from India now due to long lead times, readily available domestic supplies, and uncertainty over upcoming safeguard quotas," said a source. The HRC export index nudged down to $597/t FOB in February against $601/t in January while offers to the Middle East dipped 1% and to Vietnam 2% m-o-m.

Red Sea crisis boon for Black Sea billets? The only slightly bright spot was the billet from Black Sea. Facing sanctions, Russia has been mainly concentrating on its domestic and CIS markets. Offers for Black Sea billets rose a marginal 1.4% m-o-m. Possibly the Red Sea crisis has turned into an advantage for Russia against its Asian counterparts. It is weaving in the risks and higher costs stemming from the ensuing shipping disruption.

The increase can also be attributed to limited availability, anticipation of a more active construction season in the exporting regions, and absence of some Asian suppliers due to the Lunar New Year.

Turkiye rebars face export barriers: Rebars globally have been feeling the heat of lesser demand, competition and pricing pressure for months now. Of late, the strained political relations between Israel and Turkiye are impacting the latter's rebar exports to the former. That apart, Turkiye is facing competition from North African countries in terms of longs exports to the EU.

Lunar holidays keep iron ore offtake low: The China Iron and Steel Association (CISA) reported steel inventory of key mills rising 18% in mid-February 2024 against early-February levels and by 24% m-o-m. The rising inventory was a testimony to the overall dullness that prevailed. SHFE HRC futures fell from RMB 4,084/t ($567/t) in December to RMB 3,953/t ($549/t) in February 2024. Most end-users were on holiday or mills undertook maintenance of their blast furnaces. Thus iron ore demand from Chinese mills, the largest consumer of this raw material, was barely seen last month. Notably, iron ore inventory at major Chinese ports rose to 134.9 mnt in end-Feb compared to 125 mnt in end-Jan'24.

Scrap feels supplier-side pressures: Benchmarked imported HMS 80:20 scrap prices into Turkiye remained slightly depressed because of sluggish domestic rebar sales, but importantly supplier-side issues persisted. Throughout February, bulk HMS (80:20) prices from the US witnessed a $25/t m-o-m drop to $395/t as compared to $420/t at the beginning of the month. US domestic scrap sellers are actively reducing inventory in apprehension of a market downturn. Plus, oversupply was observed amid pressure from Turkish mills to lower prices.

Sluggish demand, supply pressures hit coking coal: Concerns persisted among end-users regarding the sustainability of the prevailing price levels, attributed to sluggish demand from India and a declining Chinese market. Against this backdrop, trading activity remained thin in the Asian market, with some sellers refraining from actively offering cargoes due to uncertainty surrounding a major Australian miner's coal supply pipeline for the April-loading window.

Outlook

Winter's seasonal slowdown has marked most markets across the world while recession in many countries has added to the woes. Two wars and disruptions in the Red Sea are adding to logistic costs and this could lead to concentration on local markets.

On the positive side, inflation seems to be going down in the US and the EU. If central banks start reducing interest rates, it may give a serious boost to economies once again.