China weekly: Stimulus measures, gains in futures lift market sentiments

This week, Chinese steel prices across all product categories witnessed an uptrend with the introduction of stimulus measures by the country's central bank to support the property market and gains in Shanghai Futures Exchange HRC and rebar futures.

China's crude steel output dropped by 8% m-o-m to 79.76 mnt in October 2022 compared with 86.95 mnt in the previous month. However, production rose by 11% y-o-y against 71.58 mnt in October 2021, as per data released by the National Bureau of Statistics (NBS).

The average daily crude steel output of CISA-affiliated mills stood at 1.99 mnt in early-November, down 2% m-o-m.

• Steel inventory at CISA mills stood at 16.72 mnt in early-November, up 0.25 mnt or 2% from 16.42 mnt in late-October.
  
  
• Compared with the beginning of CY22, inventory increased by 5.42 mnt, or 48.02%.
  
  
• Inventory rose by 3.21 mnt or 23.8% compared to the year-ago period.
  
  

Product-wise sentiments:

1. China spot iron ore prices increase w-o-w: Chinese spot iron ore fines Fe 62% prices opened at $95.7/t CNF China for the week and assessed at $99.1/t, CNF China towards the weekend. The spot prices of iron ore in China increased on improved sentiment among market players.

According to several market sources, the Chinese government is encouraging steel mills in South China to restart production.

Iron ore inventory at major Chinese ports stood at 135.45 mnt on 16 November, down 0.55 mnt as against 136 mnt a week ago, as per data maintained by SteelHome.

a) Spot pellet premium inch up on week: Spot pellet premium for Fe 65% grade pellets was assessed at $22.4/t, inched down as against $22.1/t last week.

Iron ore pellet premiums inched up on hopes that a new round of steel and sintering production cuts in China might lend some support to pellet demand.

b) Spot lump premium up w-o-w: Spot lump premium stood at $0.1485/dmtu, down as against $0.1185/dmtu last week.

Expectations of more sintering cuts in the short term might continue to push up lump premiums.

2. Coking coal prices fall w-o-w: Coking coal prices fell by $40/t w-o-w to $260/t FOB against $300/t FOB last week. Oversupply concerns and slow demand have pushed prices downward.

3. China's billet prices rise towards weekend: Steel billet prices in China's Tangshan rose by RMB 60/t ($8/t) w-o-w. Prices stood at RMB 3,560/t ($500/t), including 13% VAT, on 18 November. Low inventories and hike in futures have supported domestic billet prices., SteelMint notes. According to data maintained with SteelMint, China's SHFE rebar futures contract for January 2023 delivery closed at RMB 3,716/t ($522/t) on 18 November, a rise of RMB 79/t ($11/t) w-o-w.

4. HRC export offers rise w-o-w: China's HRC export offers registered a sharp increase of $55/t w-o-w to $570/t FOB China against $515/t FOB last week. Appreciation of Chinese currency against the US dollar and increase in SHFE HRC futures contributed to the rise in export offers. Moreover, higher offers kept buyers on the sidelines with limited activity in the exports market.

Domestic HRC prices increased by RMB 50/t ($7/t) w-o-w to RMB 3,770/t ($530/t) compared with RMB 3,720/t ($523/t) last week. The central bank's pledge to increase financing support for the country's real estate sector, plans to ease COVID restrictions coupled with extended gains in HRC futures lifted market sentiments this week, lending support to spot prices.

HRC futures on the Shanghai Futures Exchange (SHFE) rose by RMB 102/t ($14/t) w-o-w to RMB 3,798/t ($533/t) as on 18 November.

The world's top steelmaker, Baosteel, has slashed its monthly HRC prices by RMB 100/t ($14/t) m-o-m for December sales.

5. Domestic rebar prices up w-o-w: China's domestic rebar prices rose by RMB 130/t ($18/t) w-o-w to RMB 3,810/t ($535/t) from RMB 3,680/t ($517/t) last week. Prices increased w-o-w following 16 stimulus measures introduced by the central bank to support the property sector. Furthermore, restrictions on production by mills also supported prices. However, construction activities were impacted later this week due to rains in some regions of the country.

6. Shagang Steel lowers rebar prices by $14/t: China's Shagang Steel has lowered rebar prices by RMB 100/t ($14/t), while wire rods and coiled rebar prices remained unchanged for mid-November sales. Effective prices-

• Rebar (16-25 mm): RMB 3,900/t ($548/t)
  
  
• Wire rods (6-10 mm): RMB 4,310/t ($605/t)
  
  
• Coiled rebar (8-10 mm): RMB 4,400/t ($618/t)
  
  
• All prices are ex-mill, including VAT.
  
  

7. Shagang lifts scrap purchase prices: Shagang Steel lifted scrap prices three consecutive times this week by RMB 100/t ($14/t) each for purchase of all grades of scrap. Post revision, HMS (6-10 mm) prices are at RMB 2,910/t ($409/t) delivered to headquarters, including 13% VAT, effective from 15 November.