Weekly: China steel market highlights

This week, the Chinese steel market prices exhibited varied responses to concerns over Tangshan Government's order to suspend blast furnace (BF) activities for mills falling under the city premises to curtail carbon emissions. Along with this, a decline in futures towards the week-end reduced the accumulated increase in prices for both raw materials and finished products.

However, HRC export offers increased on the back of surging freight costs and the absence of clarity over the export rebate cuts.

China's Shagang Steel hikes scrap purchase price by $15- Shagang Steel has raised scrap purchase price on 2nd Mar'21 by RMB 100/t ($15) for all grades. Currently, the price for HMS (6-10 mm) stands at RMB 3,390/t ($521), inclusive of 13% VAT, delivered to headquarters. Scrap deliveries to Chinese based mills have remained on the lower side after CNY holidays due to difficulty in scrap collection, resulting in tighter domestic availability.

1. China spot iron ore prices up during the week- Chinese spot iron ore prices opened at $174.35/t and hit an over nine-year high on 4th March at INR 178.45/t, CNF China as interest for medium-grade fines remained strong amid supply tightness. The level was last witnessed towards Sep '11. Prices picked up on tight supply. Port stocks remained lowered during the week, as arrivals from Brazil and Australia remained relatively low and mills gradually resumed buying at the ports.

However, towards the weekend, prices dropped to $174.65/t following a slump in iron ore futures.

Yesterday, iron ore and steel futures in China tumbled as demand optimism waned amid concerns about China's steel production cut this year. The Tangshan Government's plans to close seven smaller blast furnaces in March and reduce emission by 40% in 2021 firmed up market expectations of a reduction in Chinese crude steel output for the whole year.

As per data compiled by SteelHome consultancy, iron ore inventory at major Chinese ports was recorded at 129.5 mn t as against at 129 mn t assessed a week ago.

- Spot pellet premium up w-o-w- Spot pellet premium for Fe 65% grade pellets was assessed at $51.05/t up by $ 1.8/t. Seaborne iron ore pellet premiums inched up on continued demand amid rising prices for iron ore fines. Premium increased on limited supply of high-grade pellets with European and North Asian end-users having a high take-up rate of pellets on their long-term contracts.

Steelmakers are likely to increase their utilization of pellets given their attractive value-in-use in comparison to sinter feed. Market depicted a surge in buying interest after the lunar New Year holidays with an 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 recorded at 5.5 mn t as against 6 mn t assessed a week ago.

- Spot Lump premium up w-o-w- Spot Lump premium was witnessed at $ 0.5105 against $ 0.4450 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 18.6 mn t against 18.9 mn t last week.

2. Coking coal prices drop marginally- Seaborne coking coal prices decreased marginally this week on subdued demand with buyers waiting on the sidelines being cautious amid high volatility.

The price gap between offers and bids has presently widened, after buyers lowered their bid levels in view of negative short-term sentiment, in ex-Chinese markets.
Lately, spot trading activity in the seaborne coking coal market has remained low due to weak buying interest from most end-users in India among other Asian importers.
Australian coking coal prices are expected to remain under pressure due to oversupply until the Chinese import ban is lifted.

The latest offers for the Premium HCC grade are assessed at around $122.00/t FoB Australia as against $126.00/t FoB basis in the preceding week.

3. Chinese domestic billet prices settled with a rise of RMB 30 ($4.6)- This week, Chinese domestic billet prices settled with a rise of RMB 30/t ($4.6/t). The prices of commonly traded Q235 billet 150mm diameter was reported at RMB 4,310/t ($663/t) in Tangshan, including 13 % VAT.

4. China HRC export offer rises w-o-w on soaring freight cost- Chinese HRC producers raised their export offers to $715-720/t FoB China, up by around $10-25/t compared to last week's offer at $690-710/t FoB basis. Surging freight costs have created a tense situation for both exporters and importers along with the uncertainty regarding export rebate cuts.
Bids from importers are being heard at around $715/t FoB China basis, and some tier-I mills are offering higher at $760-765/t FoB basis.

The current week assessment of domestic HRC price stands around $4,800-4,830/t (Eastern China), down by RMB 70-80/t w-o-w in comparison with RMB 4,880-4,900/t (Eastern China).

Initially, the prices dipped on concerns over falling futures at the beginning of the week. However, the Tangshan Government's suspension orders for blast furnaces (BF) falling under 450 cubic-meters of city premises to curtail air pollution boosted the restocking activities and prices towards the weekend. Further, trade activities have increased with more participants resuming their activities after the CNY break.

5. Domestic rebar price rises w-o-w with restocking activities- Rebar producers raised their offers by RMB 30-40/t to RMB 4,530-4,550/ t (Northern China) in contrast with RMB 4,490-4,520/t (Northern China) a week ago. Restocking activities on the resumption of construction activities in spring season along with a rise in Rebar futures early in the week kept the prices rising. However, buying interest subsided towards the weekend with participants attaining a wait-and-watch approach over high prices to check any further hike.