Demand Recovery Boosts Ferrous Market

SHANGHAI, Feb 17 (SMM) - This week, the prices of ferrous products, including rebar, iron ore, HRC, coke and coking coal rebounded. As of the today, iron ore prices rose 2.01% to 889.5 yuan/mt; rebar prices rose 1.36% to 4167 yuan/mt; HRC prices rose 0.98% to 4240 yuan/mt; coking coal prices rose 2.60% to 1897 yuan/mt; coke prices rose 3.15% to 2831.5 yuan/mt.

The increasing operating rates of downstream real estate and infrastructure industries boosted the demand for the steel products. At the same time, sales of real estate market have recovered, and the market was optimistic about future steel demand. Ferrous market picked up amid demand recovery and optimistic sentiment.

Strong iron ore fundamentals and active production of steel mills

The supply of iron ore increased. According to SMM research, the total global iron ore shipments stood at 25.07 million mt last week (February 4-10), down 6.8% on the week. Among them, the imports from Australia to China fell 9.2% from the previous week, and that from Brazil increased 328.6% on the week. According to SMM research, arrivals of iron ore recorded 28.83 million mt, up 26.4% on the month.

As of February 17, iron ore inventories across 35 ports tracked by SMM totalled 137.11 million mt, an increase of 1.02 million mt from the previous week but down 16.53 million mt year-on-year.

However, due to the slow recovery of terminal demand, the steel mills actively picked uo goods from ports. The daily average shipment rose 79,000 mt on a weekly basis to 3.03 million mt this week.

According to SMM survey, the average operating rate of blast furnaces stood at 92.12% as of February 15, up 0.45 percentage point from a week ago. The daily average pig iron production of sample steel mills was 2.22 million mt, an increase of 12,300 mt. The daily production across China is estimated at 2.65 million mt, up 14,700 mt on the week. And according to SMM's prediction, the subsequent resumption of blast furnace production will still increase.

In addition, the current iron ore spot market was active as traders shipped actively and steel mills purchased on demand.

The demand for rebar and HRC was strong amid the recovery of terminal demand

Rebar and HRC markets were more obviously affected by the terminals.

In terms of rebar, at present, on the supply side, the profits of BF steel mills were on the break-even point, hence they were less active in increasing production. EAF steel mills resumed the production as planned after the CNY holiday, and thus the total output of rebar increased. On the demand side, speculative demand increased amid the rising futures prices. Coupled with the recovery of terminals, the overall demand picked up.

In terms of HRC, the current spot market followed the strong rise of futures, stimulating the transactions in the spot market.

Positive sentiment pulled up the coke futures, but the spot market was in jeopardy

Coke futures was leading the gains.

However, it is worth noting that the current trend of the coke spot market was completely opposite to that of the futures market. At present, the third round of coke price cut has been put on the agenda amid the market game.

On the supply side, with the price cut of coking coal today, the profits of coke companies has been restored. As such, coke companies were more willing to produce and the utilisation rate of coke capacity was 77.4%, up 0.5 percentage points.

On the demand side, although steel mills had no strong demand for restocking, the demand for coke has gradually increased compared to the previous stage.

However, it is worth noting that as the falling costs weighed on the coke prices. Coupled with pressure from steel mills and the improving profit of coke enterprises, the third round of coke price cut may be implemented next week.

SMM believes that under the current state, the overall ferrous market will remain optimistic in the short term. However, it is necessary to focus on the sustainability of demand recovery and changes in the fundamentals.