Weekly: Chinese steel market highlights

This week the country's steel market recorded a drop in futures leading to softening domestic prices of HRC, rebar, and billets. However, HRC export offers rose on the back of appreciated RMB against $. Iron ore prices rebounded towards the weekend, and coking coal prices went up in recent deals concluded.

Other major highlights are mentioned below-

• Baosteel announced an RMB 50/t hike in HRC and Heavy plates prices, while CRC and HDGI soared up by RMB 200-250/t for Oct '20 deliveries.
  
  
• Shagang Steel rolled over long steel prices for mid-Sept '20.
  
  
• Iron ore and pellet imports recorded a monthly reduction of 11% in its at 100.36 mn t in Aug '20.
  
  
• China's finished steel export volumes stood at 3.68 mn t in Aug '20, down by 12% m-o-m.
  
  
• Chinese finished steel imports also declined by 14% on the month to 2.24 mn t in Aug '20
  
  

China spot iron ore price rebounds towards week-end-

Chinese spot iron ore fines (Fe 62%) prices opened at $129.9/ t this week, dropped to $126.3/t towards mid-week, and rebounded to $ 129.05/t towards the end of the week. Mills margins remain pressured on high raw material costs, driving mills to replace mid-grade fines with a combination of high-grade and low-grade fines over the last few weeks. The continued investment in infrastructure projects in China keeps the price supported.

With Brazil still suffering from extreme COVID-19, and recovering demand in Europe, Japan, and South Korea render the Chinese imports from Brazil continued to remain subdued.

As per data compiled by SteelHome consultancy, iron ore inventory at major Chinese ports increased to 118.95 mn t this week as against 117.65 mn t assessed a week ago.

Spot pellet premium up w-o-w-

Spot pellet premium for Fe 65% grade pellets was assessed at $ 17.85/t as against $7.25/t last week.

Pellet premiums continued to rise on increasing end-user utilization of high-grade and direct feed iron ore besides its increased efficiency and cost-effectiveness. Also, the rise is attributed to anticipation of supporting fundamentals from environmental regulations closer to the winter season.

As per data compiled by SteelHome consultancy, pellet inventory at major Chinese ports picked up to 10.6 mn t as against 10.3 mn t assessed a week ago.

Spot lump premium up on cost-efficiency-

Spot lump premium witnessed this week at $ 0.0675/dmtu as compared to $ 0.0500/dmtu assessed last week. Lump premium rose on the back of better cost efficiency relative to sintering fines and speculative interest due to sintering controls in Tangshan.

Coking coal prices increase in recent booking-

Average spot prices for seaborne coking coal have increased by $7-12/t during this week, with a decent number of bookings concluded on both FOB and CNF basis.

Despite the ongoing import quota limitations and port-related concerns, delivered spot prices to China witnessed a sharp single-day rise of $5.25/t yesterday. This was primarily driven by the conclusion of a PLV sell tender for 85,000 t with early-October laycan.

Indian demand for seaborne coking coal is gradually making a comeback which may keep FOB trade prices supported across all grades.

The latest offers for the Premium HCC grade are assessed at around $118.00/t FoB Australia as against $111.00/t FoB basis a week back.

Domestic billet prices fell sharply-

This week, Chinese domestic billet prices settled with a sharp decrease of RMB 90, against last week's closing. The prices of commonly traded Q235 billet 150mm diameter were reported at RMB 3,420/t ($500/t) in Tangshan, inclusive of 13 % VAT. The bids for imported billet in China also saw a rise and were ranging $435-440/t, CFR, for non-ASEAN billets.

HRC export offers move higher on the appreciation of RMB against $-

HRC export offers continued to show uptrend on the back of appreciation against $. However, overseas buyers stayed away amid anticipation of a fall in export offers as the domestic prices witnessed continuous fall throughout the week on falling futures.

Current HRC export offers were at $525-530/t FoB China against a $520-525/t FoB basis a week ago.

Domestic prices, however, declined significantly by around RMB 130/t w-o-w to RMB 3,890-3,910 /t (Eastern China) in contrast with RMB 4,050-4,070/t (Eastern China) a week ago.

Also, higher crude steel output will result in an increase in inventory levels which may result in a fall in domestic prices.

Rebar export offers increases w-o-w-

Improved demand and relatively higher margins in the domestic market kept the offers firm this week. On the other hand, overseas buyers continued to bid low and eyeing for cheaper cargoes for imports.

Current offers are at $485-490/t FoB China as against $472-485/t FoB basis in the previous week.

Domestic market prices were also up by RMB 10/t w-o-w at RMB 3,680-3,700 /t (Eastern China). The demand was good with the construction sector maintaining their procurement rates to quench their daily requirements amid better climatic conditions.