Global steel, raw material export offers stable in Jan'24; HRCs find support in rising EU prices

• Iron ore impacted by China's tapered crude steel output
  
  
• Firmer scrap prices in early Jan keep billets, rebars supported
  
  
• Supply issues slightly raise coking coal prices
  
  

Morning Brief: Global steel prices moved in a narrow range in January 2024 m-o-m, showed data maintained with BigMint.

Chinese HRC offers dropped by a mere $1/t to $574/tonne ($575/t in December, 2023). Japanese HRC offers upped by $7/t to $610/t ($603/t) while Indian mills refrained from offering over October-December but resumed at $601/t, which was higher from September 2023's $580/t. Black Sea billet export offers rose $3/t to $512/t ($509/t) while Turkiye's rebar rose around 2% to $615/t (604/t). All prices were on FOB basis.

In raw materials, Fe62% iron ore fines, CFR China dipped by $1/t to $135/t ($136/t, while the premium HCC coking coal from Australia, CFR India, rose $3/t to $347/t ($344/t).

HMS 80:20 scrap, CFR Turkiye, increased by a marginal $1/t to $421/t ($420/t) in the month under review.

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

EU price upturn keeps HRC offers stable: Quite a few factors impacted hot rolled coil offers in January. China's domestic HRC prices remained flat amid scarce demand. For instance, Baosteel kept prices unchanged for February 2024 sales, after raising the same in December 2023 and January 2024 because of subdued domestic demand. Also, the market for HRCs internationally softened since the European Union's domestic prices showed an upturn but which also offered a prop to Chinese HRC offers.

Japanese export offers rose amid an increase in domestic prices as the Kanto scrap tender price for January rose by $14/t. Plus, prices in the EU firmed up, offering support.

Indian mills returned to the export market after a hiatus of three months as some cargoes were booked to the Middle East and interest was revived in Vietnam in early January, although no deals were clinched. Additionally, there was some restocking interest from the EU. Thus, overall, the sentiments improved for Indian mills.

EU steel prices have spurted amid rising raw material and energy costs amid slack demand.

China's tapered crude steel output impacts iron ore: Iron ore had staged a smart come-back from September last year on Chinese restocking. But, its crude steel output tapered off in the second half of 2023, impacting iron ore demand. China's December 2023 crude steel production dropped 13% m-o-m to 66 million tonnes, which had a cascading impact on iron ore demand from the world's largest consumer of this high-grade variety.

Longs stay supported on rise in scrap prices: Hike in global scrap prices kept Black Sea billets and Turkiye's rebar supported.

Indeed, even if scrap prices fell in the second half of January, these had risen in the first half as Turkish mills resumed imports of the same. For instance, from a level of $415/t CFR Turkiye in the first week of January, these rose to around $425/t in the second week but fell off to $420/t levels in the latter half. Turkiye's aggressive scrap restocking for February deliveries was spurred by strong domestic demand for rebars. Higher scrap prices also pressured rebar margins. But the ample scrap inventory cooled down demand later in January.

Turkiye's weaker rebar demand keeps scrap flat: Turkish deep-sea imported ferrous scrap prices remained range-bound at $412-428/t in January, with a moderate level of deals struck amid weaker domestic rebar sentiments. Prices of Turkish imports of HMS (80:20) of US/Baltic origin hovered at $415-420/t CFR, despite price pressure from Turkish mills. The latter, fearing a slowdown in domestic rebar sales due to colder weather, aimed for sub-$420/t CFR levels for premium material. The scrap-to-rebar spread was assessed at $185-195/t, narrowing by $4-5/t from last month.

Coking coal: Prices dropped a tad towards end-January due to low buying interest from major importing countries on tepid winter steel demand. But, supply-related worries kept prices a little supported. There were concerns over potential disruptions in shipments due to tropical cyclone Kirrily which made landfall near the Australian coast. Consequently, ports, including Hay Point, Abbot Point and Gladstone, experienced scheduling haults, contributing to the price support. That apart, Gladstone Port's maintenance schedule for five days in January led to congestion at other ports, impacting deliveries.

Outlook

If the rising graph of EU's HRC prices persists, export offers from competing countries will find some support.

Challenging winter conditions in the US, Europe, and Baltic have impacted scrap supply, preventing it from following iron ore's softer footsteps. But scrap could remain range-bound, hovering at $420-$425/t CFR in the near term if Turkiye's stocks do not liquidate amid sluggish steel demand.

Meanwhile, Russian exporters are facing growing payment challenges because of tightened US sanctions against financial institutions assisting the former. Payment transfers, even if in the short term, may become costlier and support Black Sea billet offers.