Global steel, raw materials prices see slight uptick in Oct'24. Will the momentum sustain?

• Chinese HRC export prices soften after brief recovery
  
  
• Turkish imported scrap prices rise amid tight US supplies
  
  
• Iron ore prices may weaken in absence of stronger Chinese stimulus
  
  

Morning Brief: Global steel and raw materials prices staged a marginal recovery in October 2024, as per data available with BigMint, largely due to expectations of a turnaround in steel market sentiments following the Golden Week holidays in China in the first week of the month and announcement of stimulus measures to shore up the Chinese property sector.

However, these expectations have been largely belied amid weak end-user demand in China, subdued global manufacturing demand and tight financing conditions affecting the housing construction sector globally.

Moreover, ongoing geopolitical issues in the Middle East and anti-dumping investigations have kept global market sentiments sluggish.

Price overview

In the flat steel segment, Chinese monthly average HRC export offers witnessed the sharpest uptick, increasing by 13% m-o-m in October, while Japanese export offers inched up by $5/tonne (t) to reach $495/t FOB Japan.

In the longs segment, despite high Chinese exports of semis and finished steel, as well as tight financing conditions impacting the housing construction sector globally, monthly average Turkish rebar export offers edged up by 5% m-o-m to reach $615/t FOB, the highest since January'24. Black Sea billet export offers, too, increased around $10/t m-o-m.

Where steelmaking raw materials are concerned, benchmark HMS (80:20) scrap prices edged up by $11/t m-o-m to around $380/t CFR Turkiye, while iron ore prices witnessed an uptick of 12% m-o-m.

Factors impacting steel, raw materials prices in Oct'24

Pre-holiday stimulus boosted Chinese HRC export prices, as prices of domestic steel products maintained the uptrend in the last week of September supported by positive market sentiment following Beijing's sweeping stimulus measures aimed at stabilising economic growth. Steel sales in the physical market also improved due to end-users' replenishment ahead of China's National Day holidays.

However, trade protectionist measures in major importing countries, softening global demand and weakening HRC futures started weighing on HRC export prices from the second week of October onwards. Offers to the Middle East and Vietnam dropped in the range of $15-20/t in the third week. Weaker-than-expected stimulus is impacting domestic steel prices and exerting pressure on export offers, not to mention a strengthening RMB and anti-dumping measures in key countries.

Indian HRC export market threw up mixed trends in October, with mills resuming their offers to the Middle East in the first week when the Chinese market withdrew for the Golden Week holidays. In the third week, offers increased by around $35/t to $565-575/t CFR UAE. But offers to the EU fell by $5-10/t to $590-600/t CFR Antwerp on weak EU demand.

However, Chinese traders are back with offers to the UAE, which fell a further $15/t CFR w-o-w in the third week, thereby reinforcing the pressure on Indian mills. Mills continue to keep on hold their offers to Southeast Asia. The EU, Vietnam, and Malaysia have initiated anti-dumping investigations into HRC exports from India while Turkiye has already slapped provisional duties.

Turkish rebar export prices rose by 5% m-o-m in October to reach $615/t FOB on robust demand from Eastern Europe amid strengthening of the EURO against USD, rising Turkish domestic long steel prices and imported scrap tags. However, Turkish rebar exports have been hamstrung by geopolitics, especially since sales of 54 products have been restricted, including rebar, to Israel. Moreover, the main importing regions, the Balkans, as well as some portions of Asia, have shown subdued demand because of aggressive Chinese competition.

HMS (80:20) import prices into Turkiye increased 3% m-o-m in October on steady restocking from September onwards which is still continuing. This is due to strong steel production in Turkiye, which edged up by 6.5% y-o-y in September, as well as continued tightness in global supplies. Although Turkiye's buying momentum is expected to continue in November, a surfeit of semi-finished steel exports by China and a weak rebar export market weigh on scrap prices.

Iron ore fines prices CFR China increased by 12% m-o-m to reach an average level of $104/t in October compared with $93/t in September largely based on speculation related to improving steel demand and production margins in China after the 1-7 October holidays on the back of the recent raft of stimulus measures announced to bolster the economy. However, Chinese steel production dropped over 6% y-o-y in September and amid high portside inventory (due to consistently high imports) and strong global supplies, prices are softening again.

Premium coking coal prices rose by around 9% m-o-m on expected uptick in crude steel production by the Chinese BF-based producers post holidays following resumption in operations at some mills and improving margins. This trend was partially confirmed by the marginal increase in Chinese met coke prices after the holidays. Strong and consistent demand from India also propped up prices, with data showing Indian exports rising nearly 11% y-o-y in H1FY'25.

Outlook

The World Steel Association has predicted that the ongoing downturn in the Chinese real estate sector will lead to a 3% decline in steel demand in CY'24. On the other hand, Chinese steel exports, already at over 80 mnt in January-September'24, are expected to remain historically high this year, thereby exerting great pressure on steel prices.

If in the absence of expected stronger stimulus, Chinese steel production contracts further in Q4CY'24 amid weak market conditions and environmental vigilantism by the government, global iron ore prices are only expected to weaken further, while a glut of "predatorily"-priced Chinese steel and semis in the global market will intensify the pressure on scrap prices despite otherwise tight supply.

Coking coal prices are expected to stabilise and rise to $220-240/t FOB Australia levels in the October-December quarter or early 2025, although Indian buyers may remain subdued as mills may have already stocked up for the greater part of Q4, as per some sources.