Posted on 21 May 2021
China’s steel price declines over May 13-19 while the seaborne iron ore prices’ having regained lost ground over May 17-18 and its persistence at above the $200/dmt CFR China by May 19 despite the on-day softening have indicated the disparity between their market sentiments and varied market prospects, Mysteel Global understood from the market sources.
As of May 19, China’s national price of HRB 400E 20mm dia rebar under Mysteel’s assessment had been down for five consecutive days by a total of Yuan 726/tonne ($112.8/t) to Yuan 5,622/t including 13% VAT after having hit Mysteel’s record high since March 3 2011 on May 12, or have lost almost all the gains after the Labour Day holiday.
Mysteel SEADEX 62% Australian Fines iron ore index, in contrast, has been on a bumpy road after having hit its 11-year record high of $233.7/dmt on May 12, looking for the direction, market sources noted.
It, together with China’s domestic steel prices, fell two days to $209.6/dmt on May 14, then it rebounded for two days to $223.05/dmt on May 18 before heading downward again on May 19 by $9.6/dmt on day to $213.45/dmt, all in terms of CFR Qingdao, according to Mysteel’s data, indicating its resilience at above $200/dmt in the near term.
China’s domestic steel price slumps recently had been mainly in response to Beijing’s remarks on a few occasions regarding the too high bulk commodities prices and its possible ripple effect on the downstream industry with the first comment first made by China’s Premier Li Keqiang on May 12, as reported.
“Premier Li’s remarks had indicated that the central government might do something to tame the rapid surge in commodity prices, though no concrete measures have been imposed, the market sentiment first in steel and then iron ore had been wavered, hence the declines recently,” a Shanghai-based futures analyst commented.
Other than the pressure from China’s central government, speculative trading enthusiasm in both the spot and futures market had also been dampened, a Shanghai-based steel trader commented, adding, “frequent rainfalls lately in many parts of China have shrunk the actual demand from the end-users, intensifying their cautiousness in procurement on the possible government disciplinary efforts and thus further price declines,” he added.
Mysteel’s daily tracking showed that the trading volume of construction steel comprising rebar, wire rod and bar-in-coil among its 237 sampled traders across China has been hovering below 200,000 tonnes/day ever since May 13, a rather low level for a robust steel consumption season in China.
Traders of seaborne iron ore, however, seem little affected by recent price fluctuation, appearing confident in the price in the near term, interpreting that recent Chinese steel price decreases are more to do with the government’s stern warning than any fundamental changes in the market.
“China’s steel output has been high, iron ore port inventories have been down slowly and steadily, iron ore shipments from Australia and Brazil have not shown any substantial changes, so the fundamentals have varied little,” a Singapore-based trader said.
“Besides, steel mills are still with pretty healthy margins after recent price declines, so their iron ore consumption will continue,” he added, admitting, though, that he would closely monitoring steel mills’ margins, which would be crucial for iron ore price movement in the near future.
An iron ore trader from Zhejiang of East China agreed on the remaining solid and healthy fundamentals in the iron ore market, pointing out that steel production is unlikely to decrease in the near term.
Iron ore dispatched to global destinations from the 19 ports and 16 mining companies in Australia and Brazil had been wavering in recent weeks, with the tonnage having reversed down 2.2 million tonnes or 9% on week over May 10-16 after the gain in the prior week, Mysteel’s survey showed.
(a sunset or a sunrise?)
Despite recent falls in China’s domestic steel prices, the Shanghai steel trader, too, expects this to be temporary, as the concern on steel supply declines will steel prop pup prices.
“After some bubbles burst, steel prices will inevitably follow fundamentals more closely, so the decisive factor still lies in how long China’s steel demand will hold up in the peak season, and whether crude steel output cuts will be carried out for the remaining of this year,” he elaborated.
An official with a steelmaker in East China’s Jiangsu, however, disagreed, arguing, “I think steel prices have already peaked, as all the support from the government’s stimulus efforts had been factored in the earlier price surges, and now the impact is waning.”
He added that construction projects in some regions of China have been forced to slow down by the jumps in steel prices, and their steel demand, thus, will ease too.
An official from a steel mill in Shanxi of North China, also anticipates it unlikely for iron ore price to totally brush off the impact of the steel price drops, and achieving substantial upticks on its own in the near term, as “after all, repeated warnings from China’s central government will seriously impact the market sentiment,” he said.
Many other market sources, meanwhile, are still assessing the overall complex market situation, trying to have some judgements on the direction of the price movement in the longer term.
“Sharp gains most likely lead to sharp drops, and with H1 almost coming to an end yet China’s steel output has been rising instead of declining, I am not sure whether steel output will be cut or it is just a saying,” a second Singapore trader said.
Less steel output leads to less iron ore consumption, but higher steel prices on robust demand will be supportive to iron ore prices, and the mixtures of positive and negative factors are making it hard to have a clear-cut projection, he admitted.
Source:Mysteel Global
