Posted on 25 Oct 2021
China's domestic long steel prices slumped on October 21 after having slowly ebbing since October 11, and steel market sentiment has turned choppy now with the concerns on weakening demand and low cash liquidity, market sources shared on October 22.
On Thursday, the spot transaction price of the Q235 150mm square billet in East China's Jiangsu, the country's second largest steelmaking province, tumbled Yuan 320/tonne ($50/t) on day to Yuan 4,770/t and the country's national price of the HRB400E 20mm dia rebar plunged 68/t on day to Yuan 5,724/t against its daily decline within Yuan 30/t over the past nearly two weeks, both including the VAT and according to Mysteel's assessments.
With the temperature dropping in many parts of China and winter to come in the northern part of the country, Jiangsu is with of greater reference to the market sentiment as it is also a key trading hub in the region, Mysteel Global understands.
Some market sources attributed the latest rout in China's spot steel market and dampened market sentiment to the recent softening in the ferrous futures with thermal coal leading the way, as the most-traded January 2022 thermal coal contract at Zhengzhou Commodity Exchanged touched its third limit down on October 22, declining 14% from the settlement price of October 21 to Yuan 1,365/t, after Beijing took a series of measures recently to cool down coal market frenzy.
Besides, China's steel market fundamentals are shaky recently, especially with the possibility of further declining demand with cash flow tightness in the value chain, market sources maintained.
"The latest steel price slumps are downward corrections for them to return to their respective reasonable levels," an official from a major steel producer in Central China commented, as "previous price increases had been too fast and too high, having deviated from its fundamentals especially demand has not been robust (since after the long holiday in early October)," he elaborated.
The HRB400E 20mm dia rebar price, for example, soared to Yuan 6,039/t on October 8, the first time after the price hit its record high of Yuan 6,348/t on May 12, on the boost of the demand improvement after the holiday while deeper output cuts in many regions in China with the power supply crunch, both have failed to materialize though, Mysteel Steel noted.
"So far, market has shown no signs of supply shortage even with the severe supply cuts in September, indicating that demand has been rather weak too, as many construction sites have been struggling with cash flow constraints," a long steel trader from South China's Guangdong province observed.
On October 21, China's trading of rebar, wire rod and bar-in-coil among China's 237 traders slumped to an eight-month low of 120,026 tonnes/day, which was much lower than the threshold of 200,000 t/d for a normal trading day in October in the past years, Mysteel's data showed.
For the rest of October, "if domestic steel demand still does not improve, domestic steel prices will only decline further," the Guangdong trader commented, "partly as Chinese steel mills are still enjoying high profits in steel, and they will be willing to give in on prices should their (finished steel) stocks start to pile up," he added.
Possible steelmaking raw material price softening in the coming days will be giving Chinese steel producers more room to cut down on their finished steel prices too, a Shanghai-based coal and coke analyst pointed out.
The persistently higher coking coal prices have been the core support of coke price surges in the past few months, and "once supply tightness of coking coal eases, China's domestic coke price could face downward corrections too," he said.
So far, China's spot coking coal spot prices have appeared stable with the limited availability, according to an industrial source from in North China's Shanxi, and "end-users' coking coal procurement has been steady too despite the overall bearishness in the steel market," he added.
The latest data from the Price Monitoring Centre of National Development and Reform Commission showed that China's domestic coking coal price gained further over October 13-19, with the composite index up another 102 basis points on week to 1,818 points, or the highest since the release of the index in January 2017.
Source:Mysteel Global
