Weekly: Chinese steel market highlights

The Chinese steel market exhibited mixed sentiments this week as domestic HRC and rebar export offers gained momentum in the domestic market.

Meanwhile, iron ore prices touched a year's high. HRC and rebar export offers continued to gain tracking domestic markets. Coking coal prices declined on limited buying.

China's steel imports were at 2.61 mn t, up by 39% m-o-m amid strong demand and cost-effective import prices. Meanwhile, steel exports rose by 13% mom to 4.18 mn t in Jul '20. Also, iron ore and pellet imports were at 112.65 mn t in Jul'20, up 11% m-o-m. The imports hit record high levels for the month amid easing of shipments from Brazilian miners and rising Chinese demand as the rainy season ended in southern China.

China spot iron ore price picked up during the week-

Chinese spot iron ore prices opened at $116.35/ t this week and increased to $118.85/ t on Friday, a 1-year high.

Improved demand and resumption of operations post the rainy season led to a surge in iron ore prices. Also, deficiency of medium grade fines pushed prices higher.

Brazil has the second-worst coronavirus outbreak in the world. Hence with rising infections, it becomes uncertain whether Vale will be able to increase output in the second half of the year, further raising concerns over raw material availability.

As per data compiled by SteelHome consultancy, iron ore inventory at major Chinese ports dropped to 116.15 mn t as against 116.95 mn t assessed a week ago.

Spot pellet premium down w-o-w-

Spot pellet premium for Fe 65% grade pellets was assessed at $ 7.35/t against $ 13.15/t last week. Several market participants showed pronounced interest in European low alumina pellet brands due to their cost-effectiveness.

An abundant supply of lump may put a cap on pellet usage as the combined usage ratio of lump and pellet would not exceed 20%-25% in blast furnaces in the absence of tough emissions control measures.

The rising port inventory may also limit pellet procurement. As per data compiled by SteelHome consultancy, pellet inventory at major Chinese ports increased to 10.5 mn t against 10.2 mn t a week ago.

Spot lump premium down on the week-

Spot Lump premium was at $ 0.0400/dmtu as compared to $ 0.0550/dmtu assessed last week. High coke costs have cut into lump use. Pellets and lump stockpiles will take almost a month to decrease significantly, said market participants.

Coking coal prices fell on tepid buying-

Seaborne coking coal (HCC) prices fell this week, as new spot transactions were concluded at lower levels in China.

Chinese end-users and traders were heard to have been keeping an eye on the attractive spot prices, although limited quota availability still hindered their buying decisions.

The Indian market observed another quiet week as demand was weak and stockpiles at coal mines were building up.

The latest offers for the Premium HCC grade is assessed at around $108.00/t FOB Australia, compared with $110.50/t FoB basis a week ago.

Domestic billet prices increased w-o-w-

This week, Chinese domestic billet prices closed with an increase of RMB 70/t, against last week's closing. The prices of commonly traded Q235 billet 150mm diameter were reported at RMB 3,460/t ($497/t) in Tangshan, inclusive of 13 % VAT.

HRC export offers rise on the strengthening of the domestic market-

HRC export offers continued its uptrend and showed a further hike of around $10-15/t on the back of supply concerns and higher domestic prices.

Current HRC export offers were at $490-500/t FoB China against $475-480/t FoB basis a week ago.

Domestic prices also increased by around RMB 80/t to RMB 4,050-4,070/t (Eastern China).

Rebar export offers to move up on a weekly basis-

Rebar export offers also increased by $7/t on the week on higher prices in domestic markets.

Current offers are at $472-485/t FoB China as against $465-475/t FoB basis in the previous week. Major steel mills are offering rebar at $490/t Fob

Domestic market prices were also up by RMB 40/t at RMB 3,640-3,670/t (Eastern China).

Demand is expected to remain strong in the domestic market as construction activity resumed on improving weather conditions.