Chinese steel,iron ore fall,rebound despite sliding demand

In Shanghai by Friday afternoon 20mm HRB400 rebar was trading at around CNY 3,530-3,560/tonne ($518-523/t), level from a week earlier despite spending much of the week lower. Traders reported however that trading levels slowed down sharply once offers increased on Friday, suggesting buyers are increasingly able to hold back buying as consumption declines in the summer. Low inventories could still give the market some support however, with some traders saying they can sell cargos just days after being produced. The decline in rebar demand into the summer is having the effect of reducing the gap between rebar and hot rolled coil prices. On Shanghai spot markets rebar was trading CNY 200/t higher than HRC on Friday, down from CNY 510/t at the end of May. That gap could continue to close over the summer, especially if the automotive sector steadies and supports flat product pricing.

In Shanghai by Friday afternoon 5.5x1,500mm Q235B hot rolled coil was trading at CNY 3,330-3,360/tonne ($489-493/t), up CNY 110/t from a week earlier. There were some signs of weakness in demand however. Offer prices were actually falling steadily through Friday after traders received very few enquiries on Friday morning. As with rebar, offers increased from lows earlier in the week until buyers turned away from the market. Unlike rebar however HRC inventories remain relatively steady. There were some reports that a large proportion of inventory at major warehouses around Shanghai was being held by a few major traders and so was not actually being offered on the market. Even so inventories are likely to continue to weigh on HRC prices.

Chinese mills are betting on steady HRC prices in the coming weeks, with Baosteel, Wugang, Shougang and Angang all keeping their July list prices steady. Baosteel’s 5.75x1,500mm SS400 coil was left at CNY 4,232/t ex-works from its Shanghai plant.

Seaborne iron ore prices recovered to the mid-50s on Friday on the back of a stronger Chinese steel futures market. Prices continue to fluctuate with steel, and a combination of high port stocks and falling construction activity mean there is more risk of decline than increase. The Kallanish index for 62% Fe Australian fines regained $1.52/tonne to $55.65/dry metric ton cfr Qingdao. China’s iron ore port stocks are still over 140 million tonnes, and Chinese steel demand is softening into the summer. Iron ore is likely to continue to fluctuate with steel prices therefore and remain weak. Analysts largely agree that prices in the second half will average levels close to current prices, but that still allows for iron ore to dip below $50/t for brief periods.

Source：www.kallanish.com