SMM Daily Comments of Ferrous Metals Market (Mar 3)

SHANGHAI, Mar 6 (SMM) -

Macro

China

Government Work Report 丨2023 GDP growth target is around 5%

Proactive fiscal policies need to be strengthened to improve efficiency, and the deficit ratio is planned to be arranged at 3%.

Overseas

US Fed's officials: The Fed is not expected to cut interest rates in 2023

Raw materials:

Iron ore

Last Friday, iron ore futures fluctuated upwards, and the most-traded I2305 contract closed at 919 yuan/mt, up 1.04%. The quotations offered by some traders were still firm. The overall transaction was average. Some steel mills were relatively cautious in buying.  Traded price of PB fines in Shandong moved between 920-925 yuan/mt, up 3-10 yuan/mt from the previous trading day, and that of PB fines in Tangshan was 935 yuan/mt, up 5 yuan/mt.

SMM statistics showed that the iron ore inventories across the 35 ports in China totalled 136.26 million mt as of March 3, down 1.85 million mt WoW and 13.81 million mt YoY. The shipments of iron ore from the ports have risen for five consecutive weeks. Last week, the weekly average shipments from the ports added 16,000 mt WoW to 3.09 million mt.

Coke

On March 3, 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.

In the context of Two Sessions, safety inspections brought about by coal mine accidents have become more stringent, thus coking coal supply has decreased and the coking coal prices generally rose last week, but downstream companies were unwilling to purchase high-priced coking coal on a large scale.

Coke supply dropped only slightly. The losses of coke companies have expanded, but the coke producers were bullish on the future market thanks to the upcoming first round of coke price increase. Coke demand dropped as the steel mills restocked in advance to avoid the approaching coke price hike.

Steel scrap

Purchasing prices of steel scrap offered by mainstream steel mills stabilised.

Last week, both domestic supply and demand of steel scrap both increased. Due to the gradual loosening of the supply, the price rise of steel scrap may slow down in the short term. It is expected that the fluctuation range of steel scrap prices will be +80-50 yuan/mt this week.

Finished products:

Rebar

Rebar prices rose after falling last week. During the "two sessions" period, macro news increased. Under the condition of stable and moderate policies, the short-term supply and demand of rebar is balanced. It is expected that the SHFE 2305 rebar contract will fluctuate between 4,100-4,300 yuan/mt next week. If the more favourable news are released, steel prices are expected to break through to around 4,360 yuan/mt.

On the supply side, according to SMM research, the operating rates of EAF steel mills increased 3.86 percentage points to 48.18%. In terms of BF steel mills, the rebar output decreased by 45,700 mt to 475,200 mt due to maintenance. On the demand side, most terminal projects have resumed work. Affected by price drops at the beginning of last week, market speculative demand has weakened. After steel prices stabilised and rebounded, market transactions have improved. The overall demand was acceptable.

HRC

Considering that the current demand has not ushered in a significant release, the steel mills was less willing to increase the production. On the demand side, driven by downstream industries such as infrastructure and automobiles, SMM believes that the demand for HRC is still acceptable. During the “Two Sessions”, the overall market may be stable. However, subject to actual demand, the increase may be limited. SHFE 2305 HRC contract may run in a range of 4,260-4,460 yuan/mt.

On the supply side, the output of HRC fluctuated in a narrow range. On the demand side, the social inventory of HRC across 69 warehouses in China surveyed by SMM was 4.72 million mt, an increase of 0.36% from the previous week.