Steel Prices Fluctuate Downwards amid Weak Terminal Demand

SHANGHAI, Mar 1 (SMM) - Macro front:

Ministry of Industry and Information Technology: Encourage and support Hainan Province to accelerate the growth of the new energy automobile industry relying on its industrial foundation.

The National Development and Reform Commission recently organised the second inter-ministerial joint meeting on the implementation of 102 major projects in the 14th Five-Year Plan.

Russian Foreign Ministry: The EU’s new round of sanctions against Russia shows that this method is ineffective.

Iorn ore:

Iron ore futures prices remained weak yesterday, with the most-traded 2305 iron ore contract closing down 0.78% at 888.5 yuan/mt. Traders were less active in delivery while steel mills purchased cautiously, hence the market transactions were average. The transaction prices of PB fines in Shandong were mainly 891-895 yuan/mt, which was 1-10 yuan/mt lower than the previous day, while the PB fines in Tangshan were sold at 893-905 yuan/mt, down 1-10 yuan/mt

Recently, due to the impact of environmental protection and production restrictions in Hebei, the demand for iron ore has declined. In the short term, prices of iron ore are mainly affected by the demand for finished products and macro policy. Iron ore prices are expected to decline today.

Coke:

On February 28, the transaction prices of first-grade metallurgical CQD in Luliang, Shanxi were 2,890 yuan/mt.

The two sessions are approaching, and safety inspections are strictly enforced, coking coal production has decreased while downstream demand was released. Coupled with the demand from traders, market sentiment improved and quotations for some coal types have increased.

On the supply side, traders gradually increased their procurement and some steel mills have increased their purchases of coke, hence coke stocks in coke companies continued to decline.
On the demand side, due to the impact of environmental protection, some steel mills conducted the production cuts, but the impact was not significant. Currently, steel mills were still operating at a high level, and the demand for coke was still strong.
On the whole, the rising costs expanded the losses and coke enterprises intended to increase the prices. Coupled with the increasing demand from some steel mills, it is expected that the short-term coke prices may remain strong.

Steel scrap:

Traded prices of steel scrap in China stayed stable yesterday.

In the short term, the steel mills will be more willing to produce amid acceptable profits. The demand for steel scrap will grow, hence the scrap prices will move rangebound with some upward potential this week.

Rebar:

Rebar futures prices fluctuated with occasional falls yesterday and lost 0.64% throughout the day. On the supply side, in the past two days, prices of iron ore and coke have fallen more than finished product prices, driving the steel mills’ profit margins and their production enthusiasm. Output loss caused by BF mill maintenance dipped 45,700 mt to 407,800 mt. In terms of EAF mills, the fall in steel scrap prices in some regions eased the raw material shortage, which pushed up the operating rates. The overall construction steel output is growing rapidly. On the demand side, infrastructure projects in various places have started as planned, and the terminal rigid demand was acceptable. Intraday futures and spot prices fell. The speculation demand decreased, and the overall demand was average.

Iron ore prices can hardly fall as steel mills gradually ramp up their production. SMM believes that the rebar futures prices will bounce back. In the mid-term, the market shall keep an eye on the growth rate of rebar production. In the case of continuous recovery of steel mills’ profits, if steel mills ramp up production significantly in March, the steel prices may suffer pressure.

HRC:

HRC futures prices fluctuated at low levels and dipped 0.54% yesterday. Spot transactions were generally poor yesterday. Terminals and traders mainly held a wait-and-see sentiment. Some traders even shipped at low prices, but the transactions were mediocre.

HRC supply fell due to the steel mills’ maintenance and is expected to fall further. Iron ore prices fluctuated with some drops, but coke prices are expected to grow, which firmly supports the HRC costs and limits the downward space of HRC prices. On the whole, as the follow-up demand enters the verification period, the prices of HRC will continue to fluctuate in a wide range.