Weekly round-up: China's billets, rebar prices rise on improved demand

Chinese domestic steel prices (except HRCs) increased this week over improved demand alongside tight supplies. In addition, the National Health Commission reported around 221 new Covid cases in the beginning of the week, which has raised concerns while some parts of China have already taken strict measures to control the spread.

Monthly export-import highlights

i) Steel export volumes stood at 66.90 million tonnes (mn t) in CY'21, up 25% as against 53.67 mn t in CY'20.
ii) Steel import volumes plunged 29% to 14.27 mn t in CY'21 from 20.23 mn t a year ago.
iii) Iron ore (including pellets) imports were recorded at 1,124.32 mn t in CY'21, decreasing by 4% against 1,170.10 mn t last year.

Market overview

1. China spot iron ore prices inch up w-o-w: Chinese spot iron ore fines Fe 62% prices opened at $125.45/t CNF China for the week and assessed at $126.75/t, CNF China towards the weekend. Intially, iron ore prices rose as market participants increased purchases of discounted iron ore fines. However, these dropped slightly on lower procurement activity in the latter half of the week ahead of the Chinese Lunar New Year.

Heavy rains in Minas Gerais state in south-eastern Brazil reportedly led to a partial stoppage of both iron ore production and transportation from Vale and suspension of iron ore mining from Cia Siderurgica Nacional and Usinas Siderurgicas de Minas Gerais.

Sources held a bearish view on iron ore prices as mills' procurement demand slowed as restocking needs have mostly been met. "Steel demand is likely to fall following its recent rise as the Spring festival holidays draw near," a Chinese trader source said.

a) Spot pellet premiums increase: Spot pellet premiums for Fe 65% grade pellets were assessed at $58.4/t, up as against $48/t last week. High-grade pellet feed may see pricing support after an increase in premiums in 2021. Pellet demand has been driven by higher direct reduction iron (DRI) production and rising ferrous scrap prices.

b) Spot lump premiums stable w-o-w: Spot lump premiums were seen at $0.3025/dmtu, against $0.2765/dmtu last week. Lump premiums remained supported by demand for direct feed as coke prices trended upward. Portside lump stocks were heard to be falling and prices were propped up by limited offers seen in the market. However, there were expectations of lump premiums falling in the short term as sources saw prices approaching higher levels with little cost-efficiency.

2. Coking coal prices up $45/t w-o-w: Seaborne coking coal FoB prices rose by $45/t w-o-w basis amid tight supply. Weather-related concerns in Australia continued to weigh on market sentiments, resulting in limited spot offers. Enquiries were heard from India for premium coking coal but no deal was reported to have been concluded. The latest prices for the premium HCC grade are assessed at around $404/t FOB Australia versus $359/t FOB a week ago.

3. China billet prices rise towards the weekend: Steel billet prices in China's Tangshan witnessed a rise of RMB 80/t ($12/t) w-o-w. Domestic billet prices stood at RMB 4,430/t ($697/t), inclusive of 13% VAT, on 14 Jan'22. According to data maintained with SteelMint, the Chinese rebar futures contract for May'22 delivery closed at RMB 4,664/t ($734/t) on 14 Jan'22, a sharp rise of RMB 138/t ($22/t) on the week and a rise of RMB 31/t ($5/t), d-o-d.

4. HRC export offers unchanged w-o-w: China's HRC export offers remained unchanged at $760-770/t FOB China for the second week in a row. Bid-offer disparity along with limited enquiries are factored as major reasons.

In the domestic market, HRC prices dropped by RMB 10/t to 4,900-4,920/t ($771-774/t) eastern China compared to RMB 4,900-4,930/t ($771-776/t) eastern China last week. Despite sharp gains in the futures market, domestic prices fell due to seasonally weak demand. However, demand is likely to pick in the upcoming weeks as China's State Council will release funds for various projects via local governments.

5. Domestic rebar prices up w-o-w: Domestic rebar prices stood at RMB 4,580-4,640/t ($721-730/t) northern China, up RMB 80-90/t ($13-14) compared to RMB 4,500-4,550/t ($708-716/t) northern China in the previous week. SHFE rebar May'22 contract settled at RMB 4,648/t ($732/t), up by RMB 160/t ($25/t) on the week.