Global steel, raw material prices catch Nov chill. Short-term rally unlikely

• Chinese Nov stimulus fails to lift prices
  
  
• Weak scrap fails to prop up longs prices
  
  
• Iron ore flat on cautious Chinese buying
  
  

Morning Brief: Global steel and raw material prices mainly remained depressed in November m-o-m. Although prices had up-trended slightly in October, thanks to the Chinese September 2024 stimulus push, the momentum failed to sustain into November. Interestingly, China's November fiscal incentives also failed to pep up markets.

BigMint goes behind the scene:

Price overview

Where flats are concerned, in November, Chinese hot rolled coil (HRC) offers lost 4% or $22/tonne (t) m-o-m at $497/t FOB China against the four-month high of $519/t in October. Japanese offers rose 3% to $510/t ($497/t) m-o-m while Indian mills, which had held back from the market since May, kept their offers stable m-o-m after resuming from October.

In longs, Turkiye's rebar inched down 3% to $595/t ($615/t) while Black Sea billets dipped 1% to $469/t ($473/t).

All prices are on FOB basis.

In raw materials, the Fe62% iron ore fines, CFR China, remained stable, dipping a mere $1/t to $102/t ($103/t). The premium HCC coking coal from Australia, CFR India, upped $1/t to $220/t ($219/t).

HMS 80:20 scrap, CFR Turkiye, dipped the most, by 5% to $359/t ($376/t) in the month under review.

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

Chinese HRC feels macro pressures: Chinese HRC offers rose in October to a four-month high only to fall back 4% m-o-m in the current month. A huge reason lay behind the macro dynamics of the economy. The initial failure of the November stimulus to invoke confidence amongst market players is worrisome. Recent initiatives include interest rate cuts, tax incentives and support for key industries like semi-conductors and green energy. But the economy continues to stagnate and, China is expected to pull through record steel export volumes, which can amount to more than the combined production of the US and Canada!

Steel inventories were up slightly m-o-m in early November.

Chinese mills continued to fight the challenges with predatory pricing and squeezed margins.

China, EU protectionism cap Indian exports: The Indian HRC export index remained stuck at $535/t FOB east coast, despite mills resuming offers from October. They did so to reap the benefits of increased global prices in October, on the back of the Chinese stimulus. However, lower FOB offers from other key origins -- China ($497/t), Japan ($510/t) and even Russia (508/t) -- were a challenge. Chinese offers to the Middle East were consistently lower than India's in November, not offering much headroom.

Secondly, the anti-dumping probes against Indian HRC exports by the European Commission (EC), Vietnam, Malaysia, and Turkiye are increasingly snuffing out export opportunities for Indian mills.

Thirdly, the EC started registering all HRC imports from Egypt, India, Japan and Vietnam, paving the way for a potential retroactive application of anti-dumping duties, as per a notice in the Official Journal of the European Union on 25 October. India had utilised only 3% of its HRC quota for the October-December quarter.

Turkish rebar feels scrap heat: Rebar exports from Turkiye have been impacted by various factors.

1) Weak imported scrap prices m-o-m failed to prop up Turkiye's finished steel (rebar) prices. Scrap fell 5% m-o-m.

2) Globally, longs supply is tipping heavily against demand. The EU, a key market, is struggling with imported material amid decreased consumption. There is declined construction confidence amid shortage in and rising raw material costs.

3) The construction industry globally is staring at empty order books amid rising inflation and material costs, and labour issues, making the case for rebars weaker.

4) Cheap Chinese exports are reducing Turkiye's export opportunities.

Falling scrap gives Black Sea billets the blues: Black Sea billets dipped 1% m-o-m. The key reason was falling scrap prices globally, which, like rebar, failed to keep billets supported. Secondly, the global slump in steel demand is giving Russian billets the blues. Thirdly, sanctions pressures amid its war with Ukraine are keeping Russian exports restricted.

Iron ore cautious amid Chinese inventories, approaching winter: Chinese stocking up on Fe62% grade iron ore has continued quite unabated for months now, baffling analysts since crude steel production and domestic demand have been down. Over January-October, China's imports of the same rose 5% despite crude steel production being down 3%. Prices of the Fe62% fines spurted 10% m-o-m in October, spurred by the September stimulus but remained flat in November amid some cautious buying. High port-side inventories, a stronger dollar and mills' planned maintenance programmes amid the approaching winter kept prices stable m-o-m.

Weak demand, Chinese billets weigh on Turkiye scrap: Turkish imported ferrous scrap prices fell $17/t m-o-m in November. This decline is attributed to 1) weak rebar exports amid sliding global and domestic sales. 2) A lack of domestic scrap demand in Europe, combined with a weaker euro (which hit almost a two-year low), weighed on dollar-denominated scrap offers from the Continent. 3) Pressure from Chinese billets weighed on global scrap offers. The former hovered at $485/t CFR Turkiye, pulling down US bulk HMS 1&2 (80:20) to $343-345/t CFR.

Diwali, cautious buying dull coking coal prices: Prices of coking coal shipped from Australia to India remained stable m-o-m because of tapering demand amid the festive season last month. Secondly, the post-Diwali demand turnaround was measured and volatile, which also kept buyers away in November.

Outlook

In the short term, steel and raw material prices will likely move in a narrow range considering that global fundamental will not change drastically m-o-m.

India's steel consumption is expected to rise 8% next year but the short-to-medium term will be pressured by FTA-fuelled steel imports which is subduing domestic HRC demand.

Commodity prices are hugely governed by China. But, it remains to be seen whether the periodic stimulus push in the face of slow domestic and global headwinds will be enough to achieve its 5% targeted GDP growth in 2024, despite the hype surrounding its improved manufacturing and trade surplus and bloating exports. The scenario is expected to be aggravated by possible tariff and non-tariff barriers from the Trump administration, going into 2025.

Europe's inflation is expected to ease marginally to 2.5% in 2025 from this year's 3%, but no serious restocking is expected before end-2025.