Weekly: Chinese steel market highlights

Chinese steel market sentiments remained bearish. Prices continued to go south due to cold weather, uncertainties ahead of spring festival and increasing COVID cases. China produced 1.05 bn t (1,054.83 mn t) of crude steel in CY '20, up by 6% from the previous high of 996.34 mn t last year.

Chinese spot iron ore prices dropped during the week-Chinese spot iron ore prices opened at $173.6/ t this week and slid to $168.6 towards the weekend. Iron ore prices dropped on sluggish demand and lower steel margins. Several steel mills in Hebei province were heard bringing forward blast furnaces maintenance due to COVID-19 pandemic in the region.

Vale - Brazil's largest mining company has resumed production at the pelletizing plant in Vargem Grande, Nova Lima (MG) which was halted since Feb '19. With a nominal capacity of 7 mn t pa, the plant is expected to produce approximately 4-5 mn t pa in CY '21, according to its ramp-up and pellet feed availability. Going ahead this could lead to a further weakening of prices.

As per data compiled by SteelHome consultancy, iron ore inventory at major Chinese ports was recorded at 125.5 mn t as against 124.8 mn t assessed a week ago.

Spot pellet premium up w-o-w-Spot pellet premium for Fe 65% grade pellets assessed at $ 51.25/t up against last week prices of $ 46.65/t. The prices for pellets surged on the back of tight supply. High Indian domestic demand and limited spot supply of pellet into China led to higher prices during the week. As per data compiled by SteelHome consultancy, pellet inventory at major Chinese ports dropped to 5.9 mn t this week against 6 mn t a week ago.

Spot Lump premium up w-o-w-Spot Lump premium witnessed at $ 0.3700 /dmtu as against $ 0.3415/dmtu last week. Lump demand has surged aggressively on sintering restrictions in Tangshan and more end-users are preferring lump over pellet on account of cost-effective usage as well as a more sustainable supply as compared to pellets. As per data compiled by SteelHome consultancy, lump inventory fell to 20.9 mn t as against 21.5 mn t last weekend.

Coking coal prices rise w-o-w- Australian premium low-volatile hard coking coal rallied amid spot bookings concluding at higher levels during the week. Higher-priced bids for late February and March laycan continue to appear in the spot market, indicating strong demand from buyers.

The latest offers for the Premium HCC grade are assessed at around $135.50/t FoB Australia, which was $123/t FoB basis a week ago.

Chinese domestic billet prices remained stable- This week, the billet prices in the Tangshan market (northeast China) remained unchanged, against last week. The prices of commonly traded Q235 billet 150mm diameter were reported at RMB 3,810/t ($588/t) in Tangshan, including 13 % VAT.

HRC export offers plunged w-o-w-HRC export offer fell by $40/t w-o-w basis at $630-640/t FoB China compared to previous week's offer at $640-710/t FoB China. Major mills had to cut their offers on an increase in HRC supply and low buying from downstream buyers.

Along with this, domestic prices slashed by RMB 80-90/t w-o-w to RMB 4,460-4,480/t (Eastern China) as against RMB 4,550-4,560/t (Eastern China) a week ago.

Also, the Chinese Government nullified export rebates after the nation sets the new record in crude steel output in CY '20. This has dampened domestic market sentiments in China and thus prices are falling in the domestic market.

Rebar export offers fell slightly w-o-w- Exporters in china were offering rebar at $635-645/t FoB China for the current week in comparison with $635-655/t FoB basis in the previous week. Buyers have adopted a wait-and-watch approach as Chinese futures market prices have displayed a falling trend which further lowered their buying interest.

The domestic market prices were reported at RMB 4,060-4,110/t (Northern China), increasing by RMB 40-50/t against RMB 4,020-4,060/t (Northern China) in the previous week. Gains in the future market increased procurement rates by the buyers.