Short-term Steel Prices may Hover Sideways amid Average Demand

SHANGHAI, Mar 7 (SMM) - Marcro front

Development and Reform Commission: will formulate and issue policy documents on restoring and expanding consumption.

Xi Jinping: China cannot lack manufacturing at any time; the state will vigorously support the development of high-end manufacturing.

US monthly rate of factory orders in in January was -1.6%, which was forecast to be -1.80%, and the previous reading was 1.80%

Iron ore

Iron ore futures prices remained volatile yesterday, with the most-traded 2301 iron ore contract closing down 2.13% at 897 yuan/mt. Traders were less active in delivery while steel mills were wait-and-see, hence the market trading atmosphere was cold. The transaction prices of PB fines in Shandong stood at 894-910 yuan/mt, down 11-31 yuan/mt from last week.  The transaction prices of PB fines in Tangshan were 918 yuan/mt yesterday, down 12 -17 yuan/mt from last week. Over the weekend, the data released during the “Two Sessions” was lower than market expectations.

According to SMM research, the total global iron ore shipments stood at 30.87 million mt last week, down 1.6% on the week. The arrivals at China's major ports has dropped significantly, and the output of pig iron from steel mills increased slightly.

Coke

On March 7, 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.

The supply of coking coal has shrunk, but the first round of coke price increase has not yet been implemented. The wait-and-see sentiment in the downstream market has increased.

On the supply side, rising production costs, strict environmental protection and safety inspections have limited the production. Some coke companies are expected to reduce the production. At the same time, downstream demand was good, hence coke companies shipped smoothly. On the demand side, demand for steel products kept growing and the pig iron output continued to increase, which further driven up the demand for coking coal.

Steel scrap

Yesterday, traded price of steel scrap added 2-80 yuan/mt at domestic mainstream steel mills, while that at some mills fell slightly.

Scrap supply in some regions becomes sufficient. Short-term steel scrap prices may mainly move following the finished product prices.

Finished products

Rebar

On the previous trading day, the National Development and Reform Commission issued a document concerned about the recent excessive price increase of iron ore. Last weekend, Tangshan once again launched a level-II emergency response to heavy pollution weather. As a result, the iron ore futures prices dipped 2.13%, and rebar futures prices also dropped slightly.

On the supply side, according to SMM statistics, output loss caused by BF mill maintenance dropped 99,500 mt to 417,200 mt compared with last week, and steel mills have accelerated production resumption. On the demand side, the terminal companies continued to purchase on demand amid the falling prices. A small amount of speculative demand was released. The overall demand performed modestly.

HRC

HRC prices in mainstream Chinese cities dropped yesterday. The quotation in Shanghai was around 4,330-4,340 yuan/mt and rose slightly in the afternoon.

The current terminal demand is still recovering, but according to the apparent demand last week, the recovery slowed down palpably. The demand will rebound slowly in the near future. On the macro front, the government work report proposes a GDP growth of about 5%, emphasising the recovery and expansion of consumption, and encouraging the development of automobiles, home appliances and infrastructure sectors. The market shall pay close attention to the news released by the Two Sessions. The fundamentals will support the iron ore and coke prices, which further beefs up the HRC prices. At present, the contradiction between supply and demand of HRC is not prominent, and the market still needs to pay attention to the macro policies which are going to be introduced by the Two Sessions.