Chinese sentiment slumps on global concerns
Chinese domestic steel prices fell last week despite a decline in inventories. Sentiment was sapped by the worsening global situation, as the coronavirus forces the reduction of economic activity across Europe, the USA and elsewhere. Export prices meanwhile have also reduced as international demand has weakened and Chinese mills struggled to compete with offers from India. Iron ore prices meanwhile have also declined as steel output is being cut back globally.
In Shanghai on Friday afternoon, 20mm HRB400 rebar was trading at CNY 3,3703,390/tonne ($475-478/t), down CNY 80/t from the previous week. Last week, Shanghai experienced intermittent rainy days, and spot market demand once again retreated. Speculative demand has moved away from trading, and only construction sites are still supporting demand in the spot market. The reduction of production at blast furnace steel mills was not as strong as expected, while electric arc furnace steel mills began to resume production, adding pressure to the supply side. The decline in rebar inventory is also slower this week. Market traders believe that rebar prices will fluctuate in the short term.
5.5x1,500mm Q235 HRC was meanwhile traded at around CNY 3,330-3,360/t, CNY 110/t lower from the previous Friday. Traders began to feel less confident about price increases than they did the previous week. Offers were cut again by CNY 20/t on Friday afternoon. However, trading was becoming more active in Shanghai and inventories have fallen, although very slowly. Some traders no longer expect strong prices in the first half of 2020. Most are focussed on reducing the cost of sustaining inventories and so are selling at a loss. They do not expect a change in sentiment until there is a breakthrough in dealing with the coronavirus.
On export markets, although Chinese mills' and traders' offers have been slumping through the week, down by over CNY 20/t in total, international prices remain lower that the bottom line for Chinese offers. Few deals were heard from Chinese traders. Indian material remained the most competitive as its domestic market demand was hit by a lockdown which forced many international companies to close down factories there. Some Chinese traders have considered importing HRC from India, but due to market volatility, they have so far not booked. In China, a Northern mill offered SS400 at $ 420/t fob. For SAE 1006, some traders have offered lower at $425/t cfr Vietnam. However, these levels are far above traded prices in Vietnam. Kallanish assessed 2mm SAE1006 HRC at $400-410/t fob, $39/t lower over the week.
China's wire rod export market has remained quiet last week, and the disappearance of buying demand also led sellers to start lowering offers. Prices of Chinese alloyadded wire rod dropped significantly. After strong prices in the past two months, a major steel mill in eastern China cut its wire rod export prices by $20/t. Wire rod offers from steel mills in northern China also saw a slight reduction of $5/t last week. Most offers for alloy-added wire rod in China were at around $455-460/t fob China. Prices of non-alloy wire rod in Tangshan were flat at $445/t fob China. Traders expressed a willingness to offer discounts. In fact, the closure of some Southeast Asian markets and the cessation of shipping have shut down all business however. A trader in Tangshan said giving offers was futile without an enquiry from a customer. With Covid-19's impact growing in foreign markets, Chinese exporters have a negative outlook on the market. 6.5mm diameter mesh grade wire rod was assessed at $440-442/t fob China, down $1.5/t week-on-week.
Iron ore prices too were weak. The Kallanish KORE 62% Fe index slipped $0.40/t to $84.66/dry metric ton cfr Qingdao last Friday, down $3.70/t over the week. Stocks of iron ore at Chinese ports fell 1.57 million tonnes last week to 107.77mt, according to a count by SMM. Stocks were dragged lower by continued restocking by mills. As steel production has recovered in late March, mills have been replacing their mill stocks as they use them, leading to slightly higher portside buying. They are still not buying more than they need however, as they expect prices to fall further. Arrivals to Chinese ports also reportedly fell last week. Despite continued restocking and lower stocks at ports, iron ore is under pressure from the gloomy global economic outlook. In China, markets are recovering, but only slowly. Outside China, downstream steel consumers and steel producers are reducing output in a number of core regions, including Europe, much of Asia and the Americas. This is likely to offset a modest recovery in demand in China in the near term.
bron: Kallanish