Chinese rebar retreats while HRC strong

On Friday afternoon 20mm HRB400 rebar was trading at CNY 3,390-3,440/tonne ($496-504/t), down CNY 130/t from a week earlier. 5.5x1,500mm Q235B was trading at CNY 3,380-3,410/tonne ($495-499/t), up CNY 50/t week-on-week.

Poor weather has exacerbated the usual summer slowdown, while tighter credit will likely hamper any recovery in construction activity. Traders said buying has been slow all week, but picked up slightly on Friday once prices had fallen sufficiently to trigger some buying. The outlook however is for demand to fall further, especially considering the ongoing plum rain season. Traders expect prices to fall further, with some traders that were out of stock offering their rebar deliveries next week at below CNY 3,400/t.

Considering that credit to property developers is drying up, construction steel may struggle to pull itself out of its rut even when demand recovers in the autumn. Over the second half of the year, the market may well be decided by the balance between weaker construction steel demand and the elimination of induction furnace capacity.

Despite the increase in HRC prices, traders remain unwilling to increase inventories. With demand weak over the summer months, they still believe any increase in inventory could cause prices to fall. Traders are focussing on ensuring their inventory turns over as quickly as possible to ensure they do not lose money.

On export markets offers also increased week-on-week but buyers were resisting the hikes. 2mm SAE1006B was assessed at $460-470/t fob, up $20/t from a week earlier. In Vietnam new offers for 2mm SAE1006B were being made at around $480/t cfr. Earlier in the week, pipemaking HRC was heard traded at around $475/t cfr Vietnam. More deals were heard to Latin America at around $455/t fob base.

Seaborne iron ore prices meanwhile held steady on Friday amid a round of buying, remaining within their range in the mid-$50s. The Kallanish index for 62% Fe Australian fines gained $0.34/tonne to $56.11/dry metric ton cfr Qingdao. 170,000 tonnes of PB fines sold in tender at $55.71/t with a laycan in 21-30 July. 80,000t of MAC fines also sold on COREX at $51.65/t with a laycan in 15-24 July, while on the same platform 85,000t of Carajas fines traded at $71.85/t for August shipment. On the Dalian Commodity Exchange September iron ore settled at CNY 429.5/t ($62.88/t), down CNY 3.5/t, while on the Singapore Exchange July 62% Fe futures settled up $0.30/t at $55.62/t.

Iron ore remains torn between relatively steady steel prices and weak supply/demand fundamentals. For the moment however, steelmakers are willing to buy ore at current prices as they are still profitable. The postponement of investments in Australian ore deposits and reports of a slowdown in Chinese ore output also suggest iron ore may not fall faster than steel in the near future.

Source: www.kallanish.com