Global steel, raw material price trends mixed in Jul'24; no surprises likely in short term

• Chinese offers fall to their lowest since Jan'21
  
  
• Global longs facing Chinese dumping heat
  
  
• Turkiye restocking for August props up scrap
  
  

Morning Brief: Global steel and raw material prices showed a mixed trend m-o-m in July 2024, after down-trending in June, reveals data maintained with BigMint. However, no sharp swings were detected. Prices mainly moved in a narrow groove.

Price trends

In July, Chinese hot rolled coil (HRC) offers lost another 2% or $11/tonne (t) m-o-m to $512/t FoB China ($523/t in June 2024), their lowest so far since January 2021-the time from which data is available with BigMint. Japanese offers fell $20/t or a steeper 4% to $540/t ($560/t) while Indian mills have been holding back offers from May.

In longs, Turkiye's rebar and Black Sea billets remained almost inert m-o-m at $579/t ($578/t) and $498/t ($497/t) respectively.

All prices are on FOB basis.

In raw materials, Fe62% iron ore fines, CFR China, rose a marginal 2% or $2/t m-o-m to $109/t ($107/t). The premium HCC coking coal from Australia, CFR India, however, headed south by 2% or $5/t to $262/t ($267/t).

HMS 80:20 scrap, CFR Turkiye, upped a slight 1% to $390/t ($384/t) in the month under review.

Factors that impacted global steel, raw material prices in Jul'24

Chinese HRC offers at lowest in over 3 yrs: Chinese HRC offers fell to their lowest level since January 2021, the period from which data is available to BigMint. Sustained sluggish domestic consumption and squeezed margins are leaving Chinese mills with no option but to offload inventory overseas, and how! In a bid to capture the largest chunk of global markets, China has been dumping steel cheap across the globe at cut-throat prices. Chinese export allocations have increased, but, on average, export offers have eroded over 12% y-o-y over January-July, 2024. Prolonged lack of adequate home demand has been dragging down domestic prices and squeezing margins. The real estate sector is still struggling with investments falling another 10.1% in June, leaving Chinese steel mills with no option but to aggressively use workable strategies in exports. The domestic pricing pattern is thus also influencing overseas offers.

Indian mills hold offers amid production cuts: Indian mills stopped offering in the export market from May because of the progressive decline in Chinese quotes which were consequently making Indian offers unviable. They, instead, undertook maintenance ahead of schedule to tide over this period, especially since domestic demand was nothing to write home about. The maintenance programmes led to production cuts which allowed mills to lower their export allocations and, at the same time, keep domestic prices above Chinese export offer levels.

Turkish rebar faces Chinese competition: Rebar prices from Turkiye remained stable m-o-m because of a few factors. One, China is giving stiff competition to longs producers across the world by dumping cheap. Turkiye's key markets are Yemen, Albania and Romania as well as Europe. Two, scrap prices rose slightly m-o-m, which kept rebar supported. Three, as of 2 July, 2024, Turkiye's rebar exports have risen 25% y-o-y in the first five months of the year and their value was also up 29% y-o-y. But, prices have been impacted by low demand from Europe too. Lastly, Turkiye has been feeling the absence of the Israeli market. Around April, the Turkish Ministry of Commerce had restricted exports of 54 products, including rebars, to Israel, one of its largest markets for such products.

Black Sea billets range-bound in cautious market: The Black Sea billet was cautious amid stiff competition from China, which is upsetting the supply-demand balance in the longs market. Plus, demand from Europe was subdued which kept the billets trade range-bound. But Turkiye has been buying Russian and Chinese billets because the conversion spread to rebar was turning out to be better compared to scrap. However, the weakness in Chinese demand is slowly spreading to the rest of the steel markets.

China's lukewarm iron ore demand keeps prices stable: This raw material remained stable m-o-m as demand from China was lukewarm. Chinese crude steel production fell 1.10% over January-June, 2024, which impacted iron ore offtake. Moreover, buyers had stocked up earlier in the year, ahead of the various festivals, which had kept their appetite satiated. Thus, imported iron ore prices are being mainly guided by the robust steel exports from China.

Imported scrap rises amid stiff collection costs: Turkish ferrous scrap import prices improved slightly due to three factors. First, offers remained firm due to rising collection costs in the Benelux region. Secondly, demand for scrap in the US and UK was comparatively better and suppliers here were not in a hurry to sell. Only Turkiye was of interest to them as it offered better prices compared to South Asia. Thirdly, there were some supply disruptions in June-July because of Eid and Muharram and Turkish mills undertook active restocking in July for August shipments.

Coking coal tepid amid maintenance, prior restocking: Prices of coking coal fell almost 2% amid lukewarm demand from India. Domestic as well as export demand has been rather dull, leading to maintenance shutdowns and production cuts in India. This scenario has shrunk demand for the fuel from blast furnace mills. Moreover, buyers had booked in the previous month, fearing supply disruptions from Australia, which also led to a subsequent price cool-off.

Outlook

Global steel and raw material prices are likely to fluctuate in a narrow range in the near term amid uncertain global circumstances. Much will depend on signals emanating from China after the Third Plenum, concluded recently. So far, it seems, the session did not yield any major surprises or unexpected policy shifts.