Weekly: Chinese steel market highlights

The Chinese steel market observed decline in futures following which domestic HRC, billet and rebar prices witnessed significant fall. Chinese SHFE rebar future Jan '21 contract was on a continuous decline. During 18- 25 Sep '20, the futures witnessed a drop of RMB 81 (~$12), Chinese iron ore prices inched up towards weekend after declining early this week. Domestic scrap purchase prices also moved down with Shganag cutting down bids twice this week.

Chinese spot iron ore price inched up towards weekend-
Chinese spot iron ore fines (Fe 62%) prices opened at $120/ t this week and closed $116.05/t towards the weekend before hitting levels of $114 towards mid of the week. The prices slumped on the back of weaker purchasing power of steelmakers and decline in futures. Mills margins still remain pressured on high raw material costs. However, there was also demand for alternative medium grade fines as they were viewed as more cost-efficient than low-grade fines while serving as a cheaper alternative for end-users and also helped to cut production costs.

As per data compiled by SteelHome consultancy, iron ore inventory at major Chinese ports increased to 120.3 mn t this week as against 118.3 mn t assessed a week ago.

Spot pellet premium up w-o-w-
Spot pellet premium for Fe 64% grade pellets assessed at $ 12.55 /t this week up as against $12.50/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. High-grade pellet premiums were expected to remain supported on improving European and North Asian demand.

Spot lump premium up on stringent sintering controls-
Spot lump premium witnessed this week at $ 0.0750/dmtu as compared to $ 0.0735/dmtu assessed last week. Lump premium rose on the back of sintering controls in Tangshan. However, the recent price rebound for lump has limited its value-in-use and there is no further upside to its blending ratio.

Coking coal price rises amid steady demand-
Seaborne coking coal price rose another $6-7/t during this week, as overall buying interest remained steady despite moderate trading in the Asian spot market.

The relative price advantage for seaborne coking coal against Chinese domestic material, despite recent upticks, is still favouring buying sentiments among end-users with available import quotas in China. However, some Chinese end-users may choose to hold back restocking until the National Day holidays.

Post-monsoon recovery in Indian demand, coupled with a possible easing of import restrictions at Chinese ports, there is still room for further increases amid healthy demand outlook for November cargoes.

Latest offers for the Premium HCC grade are assessed at around $139.00/t FoB Australia which was $133/t FoB basis a week back.

Domestic billet price continues to fall-
This week, Chinese domestic billet prices settled with a sharp decrease of RMB 40, against last week's closing. The prices of commonly traded Q235 billet 150mm diameter were reported at RMB 3,330/t ($489/t) in Tangshan, inclusive of 13 % VAT. The bids for imported billet in China were ranging from $415-425/t, CFR, for non-ASEAN billets.

HRC export offer weakens on lower bids from importers-
Chinese mills further lowered their offers by $10/t amid weak buying sentiments in both domestic and overseas markets. Also, importers are looking for cheaper alternatives and are bidding lower for Chinese HRC. Meanwhile higher crude steel production leads to increased inventories resulted to drop in prices.

Currently, the offers stand at $505-510/t FoB China which was around $515-520/t FoB basis. The domestic HRC also fell by RMB 20-40/t w-o-w to RMB 3,840-3,850/t (Eastern China). The buyers have attained a wait and watch approach amid weak futures market. Also, with the upcoming National day holidays, market sentiments are expected to remain bearish.

Rebar export offer falls further-
The rebar export offers moved down by $5/t this week amid low buying interest due to availability of cheaper alternatives. Also, the buyers continued to bid $20-30/t lower than the offer from mills.

The current week assessed price stands at $480-485/t FoB China as against $485-490/t FoB basis a week ago. In similar lines, the domestic prices were also down by RMB 30-80/t to RMB 3,600-3,640/t (Eastern China).