SMM Daily Comments of Ferrous Metals Market

SHANGHAI, Feb 20 (SMM) -

Macro

China

The financial industry makes practical moves to promote consumption and stabilise the economy

On February 19, the national cargo logistics operated in an orderly manner, and civil aviation guaranteed flights increased by 3.4%

Overseas

The closing meeting of the 59th Munich Security Conference failed to reach a broad consensus on issues such as the conflict between Russia and Ukraine

Raw materials

Iron ore

Last Friday, iron ore futures fluctuated at high levels, and the most-traded I2305 contract closed at 889.5 yuan/mt, an increase of 2.01%. The overall transactions were average as steel mills purchased cautiously. Prices of PB fines in Shandong moved between 885-895 yuan/mt, up 3-15 yuan/mt from the last Friday, and those of PB fines in Tangshan were 897 yuan/mt, up 14 yuan/mt.

Iron ore inventories across 35 ports tracked by SMM totalled 137.11 million mt, up 1.02 million mt from two weeks ago and down 16.53 million mt year-on-year. The weekly average shipments of imported ore from the ports added 79,000 mt to 3.03 million mt last week since the arrivals of iron ore at ports rose two weeks ago.  In fact, the pig iron output continued to rise two weeks ago, and it is expected more blast furnaces will resume their production. Therefore, the volume of arrivals at ports has increased, and the demand also grow. The terminal demand has continued to pick up. Steel mills are expected to gain more profits, and they may restock more goods. It is expected that subsequent port inventories will decline, and the iron ore futures prices will move rangebound with some upside potential.

Coke

On February 20, the traded price of quasi-first grade metallurgical coke (coke dry quenching) in Lvliang city, Shanxi province was 2,890 yuan/mt (ex-factory), flat from the previous trading day.

Coking coal Downstream enterprises purchased on demand, and traders were less willing to buy goods. Some coal mines got higher coking coal inventories, but the overall inventory held by coal mines is currently at a low level for the time being, and quotations were temporarily stable.

Coke On the supply side, the prices of coking coal have fallen recently, slightly pushing up the profits of coke companies, and some coke companies intended to increase production.
On the demand side, the operating rates of steel mills increased slightly, and the pig iron output rose. Hence they still purchased some coke, but the traders did not buy goods.

Steel scrap

On February 16, the scrap steel scrap prices stopped falling and stabilised. In Hebei, Guangdong and Fujian, the steel scrap prices increased 20-80 yuanmt. In Yunnan and other places, the prices decreased 10-50 yuan/mt. It is certainty that the supply and demand relationship is improving.

On the demand side, the pre-holiday stockpiles of steel mills were relatively low, resulting in a strong post-holiday demand. On the supply side, steel scrap recycling and processing enterprises have not yet fully recovered, and were reluctance to sell.

Finished products:

Rebar

Last Friday, the rebar futures fluctuated at a high level, with an increase of 1.36% throughout the day

On the supply side, according to SMM research, EAF steel mills resumed the production last week, and the operating rates rose to 39.65%, which was 19.95 percentage points lower than the same period last year. In terms of BF steel mills, mostly of them maintained stable production, and the increase was small. Therefore, the resumption of electric arc furnaces contributed the major increase. On the demand side, market sentiment improved as rebar prices stabilised and rebounded. Speculative demand increased significantly and terminal purchases also increased.

HRC

HRC futures remained high last Friday and closed with gains of 0.98%. In terms of the spot market, the transactions in many markets weakened significantly. The terminal purchases on dips as needed and the speculative demand of traders was released. But the transactions were light last Friday amid the wait-and-see sentiment.

On the supply side, some steel mills in north-east China were overhauled, and thus the output of HRC decreased slightly from the previous week. On the demand side, transactions in east China, south China, and north China were active last week, and the social inventory surveyed by SMM declined 2.1% or 100,700 mt to 4.6954 million mt.