China weekly: Steel prices fall w-o-w amid decline in SHFE futures

• Iron ore spot prices decline $1/t w-o-w
  
  
• HRC export offers fall $10/t w-o-w
  
  

The Chinese steel market faced a significant decline, following the downward trajectory of Shanghai Futures Exchange (SHFE) prices. Domestic steel prices, particularly for billets, rebar, and hot-rolled coils (HRCs), declined due to weak buying sentiment in the finished steel market and volatility in futures trends. Furthermore, prices of key raw materials like iron ore and coking coal, also decreased.

In addition, the China Iron and Steel Association (CISA) reported that the total steel inventory at key enterprises reached 12.37 million tonnes (mnt) in late-December 2024. This represents a decline of 780,000 t or 5.9% m-o-m compared to 13.15 mnt in late-November 2024.

1. Iron ore spot prices fall by $1/t w-o-w: Iron ore spot prices edged down by $1/t w-o-w to $98/t CFR China as of 10 January 2024. The decrease is attributed to sluggish trading activity driven by weak market fundamentals ahead of the Lunar New Year holidays. Spot buying in seaborne cargoes was weak as steel mill margins remained under pressure and inventory levels rose. Restocking activity for mainstream medium-grade fines at steel mills appears to be decreasing in the seaborne market.

Iron ore inventories at China's major ports increased by 2 mnt w-o-w to 146.6 mnt on 9 January, according to SteelHome data.

a) Spot pellet premium *up w-o-w: Spot pellet premium for Fe 65% grade pellets increased by $0.7/t w-o-w to $18.55/t CFR China on 8 January.

b) Spot lump premium fall w-o-w: Spot lump premium decreased by $0.007/t to $0.1420/dmtu on 10 January.

2. Coking coal prices inch down w-o-w: Australian coking coal prices fell by $3/t w-o-w. PHCC was assessed at $196/t FOB Australia. Subdued demand, thin liquidity and sixth round of met coke price cuts in China kept coking coal prices under pressure.

3. Chinese billet prices drop RMB 80/t ($11/t) w-o-w: Billet prices in China's Tangshan fell sharply by RMB 80/t ($11/t) w-o-w to RMB 2,930/t ($400/t), including 13% VAT, on 10 January 2025. Billet prices have faced downward pressure due to weak demand, rising port inventories, and sluggish market sentiment in both raw materials and finished steel. The absence of clear policies or decisive actions from banks have left traders without strong support signals for physical commodities, prompting them to halt winter restocking.

4. Domestic HRC prices fall w-o-w: Chinese HRC offers fell by RMB 100/t ($14/t) w-o-w to RMB 3,270/t ($446/t) as compared to RMB 3,370/t ($460/t) a week ago following the decline in SHFE futures and weak demand for finished steel in the domestic market. SHFE HRC futures (May 2025 contract) dropped by RMB 82/t ($11/t) w-o-w to RMB 3,309/t ($451/t) against 3,391/t ($463/t) in the previous week.

China's export offers decreased by $10/t w-o-w to $465/t from $475/t last week. Moreover, Baosteel, the world's leading steel manufacturer, kept HRC prices stable for the third consecutive month. Prices remained unchanged for February 2025 sales amid subdued domestic demand.

5. Domestic rebar prices drops w-o-w: China's rebar offers edged down by RMB 90/t ($12/t) w-o-w to RMB 3,220/t ($439/t) against RMB 3,310/t ($451/t) in the previous week, following the volatility in SHFE rebar futures. SHFE rebar futures decreased by RMB 78/t ($11/t) w-o-w to RMB 3,203/t ($437/t) against RMB 3,281/t ($448/t), a week ago.

Outlook

The Chinese steel market is currently facing a challenging period with declining prices primarily driven by weak demand in the finished steel market and volatile futures trading. The upcoming Lunar New Year holidays are expected to further dampen trading activity. Unless there is a significant improvement in demand and a more supportive policy environment, the Chinese steel market is likely to remain under pressure in the near term.