Global steel, raw material prices dip in Jan'25. Will bearish trends prevail in Feb?

• Iron ore prices fall as mills complete winter restocking
  
  
• Waning export prospects pressure Turkish rebar offers
  
  
• Turkish scrap tags fall on weak rebar sales, supply glut
  
  

Morning Brief: Global steel and raw material prices declined by up to 4% m-o-m in January 2025 (till 23 January), as markets worldwide were down in the dumps, challenged by subdued demand and sluggish trade activity amid the New Year holiday lull. Additionally, weak market sentiments in China cast a shadow over global trade dynamics, as the approaching Lunar New Year has put the brakes on procurement activity in various segments.

BigMint goes behind the scenes.

Price overview

The highest m-o-m drop was recorded for Chinese hot rolled coil (HRC) offers, which lost 4.3% to settle at $465/tonne (t) FOB in January against $486/t in December. Notably, similar levels were last seen in September 2024, when offers plunged to $462/t, which, in turn, was the lowest recorded since June 2022.

Japanese and Indian mills kept offers on hold, both unable and unwilling to compete with China's rock-bottom levels.

In longs, Turkish rebar edged down by 1.2% m-o-m to a 15-month low of $567/t from $574/t, while Black Sea billets were largely steady at $443/t compared to $445/t in December, reflecting a minor 0.4% drop. Billets remained at the lowest point in over two years.

All prices are on FOB basis.

In the raw materials segment, Fe62% iron ore fines, CFR China, dipped by 2.9% m-o-m to $101/t in January against $104/t. Premium hard coking coal (HCC) from Australia, CFR India, fell by 3.3% m-o-m to $206/t in January from $213/t.

HMS (80:20) scrap, CFR Turkiye, moved down by 1.4% m-o-m to $340/t from $345/t, again at its lowest in over two years.

Factors impacting global steel, raw material prices in Jan'25

Chinese mills trim HRC export offers amid overproduction: Whatever boost the domestic steel market had received from the Chinese policy stimulus completely dissipated towards the end of January, and HRC prices fell m-o-m amid weak market fundamentals. Surplus supply continued to ail the segment, as many steelmakers resumed operations after a year-end maintenance break. Additionally, tepid construction demand prompted mills to turn to producing HRCs, as the latter provided better realisations and liquidity.

However, with the domestic market largely seeing need-based transactions, mills had to divert excess material to overseas markets. As export demand too was not healthy enough to absorb the oversupply, mills had to reduce offers to entice buyers. Additionally, it is worth noting that, in December mills ramped up exports, as they wanted to close their account books on a high note.

Meanwhile, Japanese and Indian exporters stepped back from the seaborne market (offers from India were on hold in December too), as they could not match the aggressively low offers of Chinese mills. Additionally, the European market remained depressed amid low demand due to inclement weather. The depreciation of the Indian rupee and Japanese yen were major concerns too, limiting the profitability of exporters.

Iron ore prices fall as mills complete winter restocking: Iron ore prices declined in January, as (1) mills finalised winter restocking ahead of the Lunar New Year, (2) low hot metal production and squeezed steel margins limited demand, and (3) the depreciation of the Chinese yuan drove up RMB tags.

Waning export prospects pressure Turkish rebar prices: Turkish rebar prices encountered downward pressure in January, as geopolitical tensions and seasonal factors hindered export trade. For example, China witnessed subdued market activity ahead of the Lunar New Year, and demand from the country's infrastructure segment softened as winter weather hindered construction activity.

Additionally, exports to Israel, formerly a significant destination for Turkish mills, have been halted due to the Gaza War. However, these may resume if the ceasefire is able to improve relations between Turkiye and Israel. Domestic demand from post-earthquake reconstruction efforts faded, and high interest rates weighed on transactions.

Holiday lull keeps Black Sea billets under stress: The export market for Black Sea billets was relatively quiet in January, as buyers took their time in returning to trades following the New Year holidays. A few other factors impacted the segment this month: (1) the EU market remained closed off due to sanctions on Russia for the Ukraine War, (2) demand from Turkiye dampened as the market is saturated with cheap offers for scrap, and (3) Chinese billets continue to be competitively priced.

Turkish scrap offers fall amid weak finished steel sales: Suffering from weak finished steel sales, Turkish buyers maintained low bids, which caused prices to fall m-o-m. With an abundance of scrap offers in the market, mills were able to easily replenish inventories at low values. Supply was ample for February shipments, and leftover January cargoes were available too. Overall, suppliers found no avenue for price support.

Coking coal prices dip on weak demand in India, Chinese coke price cuts: Coking coal prices dived for the following reasons: (1) there was limited buying interest in India, as a depressed steel market kept demand in check; (2) Chinese mills undertook their sixth and seventh consecutive met coke price cuts; (3) indexed prices of Australian PHCC were range-bound at around $194/t in January, which offered no support to export offers.

Outlook

February may continue to see bearish trends, as a rebound in steel prices, while possible, may be difficult to support for long amid persistently subdued demand. Additionally, the China factor will play a decisive role in influencing global trade dynamics.

With President Trump having assumed office, the threat of US-China trade tensions looms large. However, there are expectations that China will also unleash a powerful stimulus package for key industries, including steel, non-ferrous metals, construction materials, and automobiles to counter persistent deflation. While this may elevate the market mood for a while, it is uncertain if the pay-off will be sustained - after all, China's stimulus measures in recent memory have been rather weak and ineffective in reviving economic sentiments.

Another factor that could contribute to an uptrend is an improvement in Chinese trade activity following the Lunar New Year. Baosteel, China's largest steelmaker, has rolled over HRC prices for February sales, signalling confidence in market momentum. However, the supply glut in the market, which continues unabated, is a cause for concern.