Weekly: China steel market highlights

This week Chinese steel market exuded optimism on strong futures and higher domestic steel prices. DCE's most-traded May '21 iron ore futures yesterday rose by RMB 20 to close at RMB 1,151/t on optimistic sentiments despite production curbs in Tangshan. Steel futures in China also gained as downstream consumption continued to pick up.

Domestic HRC, rebar, and billet prices gained momentum on higher futures. The absence of clarity on Chinese export rebate cuts continue to keep HRC export offers higher.

1. China spot iron ore prices up during the week- Chinese spot iron ore prices opened at $175.6/t and increased to $176.65/t towards the weekend. As Chinese construction demand is expected to recover and sintering curbs slated to ease from March, market participants and traders remained optimistic and anticipated strong demand for a few months.

However, on the other hand, traders and mills are well stocked-up with finished steel and end-users were not keen on booking cargoes at the moment.

As per data compiled by SteelHome consultancy, iron ore inventory at major Chinese ports was recorded at 129 mn t as against at 128.65 mn t assessed a week ago.

• Spot pellet premium up w-o-w- Spot pellet premium for Fe 65% grade pellets was at $49.25/t up by $ 8.75/t. Pellet premium increased on a limited supply of high-grade pellets with European and North Asian end-users booking pellets at higher prices on their long-term contracts. Market depicted a surge in buying interest after the lunar new year holidays with the expectation of higher end-user utilization of pellets and attractive reselling margins at the port. As per data compiled by SteelHome consultancy, pellet inventory at major Chinese ports was recorded at 6 mn t as against at 6.2 mn t assessed a week ago.
  
  
• Spot Lump premium up w-o-w- Spot lump premium was at $ 0.4450 against $ 0.4290 last week. Tight lump inventories, high pellet prices, and low supply continued to provide support for lump premiums. As per data compiled by SteelHome consultancy, lump inventory dropped to 18.9 mn t against 19.7 mn t last week.
  
  

2. Coking coal fell sharply by $12/t w-o-w- Seaborne coking coal price fell sharply this week following ArcelorMittal's sell tender concluding at $126/t FoB Australia for 75,000 t of March-loading Goonyella. At present, there is a relatively better demand for April delivery cargoes, although demand for March-loading cargoes remained low due to unclear price movement.

The short-term market outlook remains bearish on limited buying interest, as buyers turned cautious and retreated to the side-lines amid volatility in the Chinese markets.

Australian coking coal prices are largely anticipated to remain at lower levels until the Chinese import ban on Australian coal is lifted.

The latest offers for the Premium HCC grade are assessed at around $125.75/t FoB Australia as against $138.00/t FoB basis a week ago.

3. Chinese domestic billet prices settled with a rise of RMB 140 ($22)-This week, Chinese domestic billet prices settled with a rise of RMB 140/t ($22/t). Increasing rebar futures supported the event. The prices of commonly traded Q235 billet 150mm diameter were reported at RMB 4,280/t ($661/t) in Tangshan, including 13 % VAT.

4. China HRC export offer rises by $10/t w-o-w- Chinese mills raised their HRC export offers to $690-710/t FoB China, up by $10 against $690-700/t in the preceding week. Furthermore, tier-I mills were heard to be offering at $720-730/t FoB basis

In the domestic market, HRC is being traded at RMB 4,880-4,900/t (Eastern China), surging up RMB 180-200/t in contrast with RMB 4,680-4,720/t (Eastern China) a week ago. Prices have risen as a result of a surge in the steel futures market along with concerns about global inflation.

Gains in the futures market and market buzz on export rebate cuts have kept the HRC offers on the higher side. Also, a steep hike in domestic prices resulted in higher HRC export offers this week.

5. Rebar export offers up sharply w-o-w- Domestically, rebar producers have increased prices sharply by RMB 150-160/t to RMB 4,490-4,520/t (Northern China) as against RMB 4,330-4,370/t (Northern China) in the previous week. Higher rebar futures resulted in a sharp increase in domestic prices.

Market participants have returned after CNY-break and are optimistic about the demand on the arrival of the spring season. Last week rebar export offers stood in the range of $653-655/t FoB China.