Steel Market Sentiment Improves amid Approaching Important Meetings

SHANGHAI, Mar 3 (SMM) - Macro front:

National Development and Reform Commission: To establish a financial risk prevention and control mechanism to improve the sustainability of manufacturing loans.

The number of people applying for unemployment benefits for the first time in the United States exceeded expectations.

Iron ore

Yesterday, iron ore futures still fluctuated with some ups, and the most-traded I2305 contract closed at 912.5 yuan/mt, an increase of 1.56%. Traders shipped actively while steel mills mainly purchased as needed. The overall transactions were acceptable. The transaction prices of PB fines in Shandong were mainly 913-917 yuan/mt, which was 2-5 yuan/mt higher than the previous day, while the PB fines in Tangshan stabilsied at 929-930 yuan/mt.

The inventory of the top ten ports tracked by SMM declined slightly as demand from steel mills increased in light of rising pig iron output. Only lump ore inventory increased slightly due to the declining demand after environmental protection production restriction in north China ended. The inventory of other varieties all declined slightly. The inventory of finished steels declined further amid the rising apparent demand, which supported the increase of iron ore prices.

Coke

On March 2, the transaction prices of first-grade metallurgical CQD in Luliang, Shanxi were 2,890 yuan/mt, flat from the previous day.

Strict safety inspections weighed on the supply of coking coal while the downstream demand was released. Traders purchased actively and the prices of coking coal were strongly supported. Coupled by the price premiums in online auctions, the quotations of some coal types have risen.

On the supply side, most coke companies have temporarily stabilised their production, while a few coke companies were limited by environmental factors. At present, the shipment of coke companies performed well, and coke stocks remained low.
On the demand side, steel mills resumed the production steadily and the output of pig iron continued to increase.
On the whole, the supply and demand of coke are relatively balanced and the sales of coke companies are acceptable. Coupled with rising costs, the market players still hold a bullish attitude, and the short-term coke prices are expected to rise.

Steel scrap

Yesterday, steel scrap was traded at 5-30 yuan/mt by domestic mainstream steel mills.

In the short term, steel mills will increase their purchasing volume of steel scrap, thus the scrap prices will move rangebound with some upward potential this week.

Finished products

Rebar

Rebar futures prices added 0.64% yesterday. Rebar output and demand continued to grow this week. The construction steel inventory fell further due to the early release of demand, but the growth rate of demand dropped in the week. The contradiction between supply and demand growth in the later period may intensify. The market players held diverged views. Intraday futures prices fell after soaring, and the long-short game became vehement.

Commercial housing and second-hand housing have improved significantly, and the construction of infrastructure projects is pleasing. Recent data show that the Chinese economy is recovering at an accelerated pace. And bullish policies which surpass market expectations may not be introduced by the Two Sessions that will be held on the weekend. China will still focus on economic stability. The current steel prices may continue to fluctuate at a relatively high level under the expected demand peak and cost support.

HRC

HRC futures prices fluctuated upwards yesterday and added 0.77%. Spot transactions were generally average yesterday. The terminal companies still held a wait-and-see sentiment, and some traders cut their prices to ship.

According to SMM statistics, the social inventory of HRC in 69 warehouses (large survey samples) across China was 4.72 million mt as of this week, down 16,900 mt or 0.36% from the previous week. The HRC demand is growing steadily. HRC costs will increase. The iron ore prices are firm, and coke prices are expected to rise further. Therefore, in the short term, steel mills and traders will insist on high quotes, and it will take some time to verify the demand expectations. The market is more bullish under the promotion of a favourable macro front. It is expected that the prices of HRC will fluctuate with occasional rises.