China comes back from long holiday with mixed signals

The Chinese market has resumed work after its long holiday which started on February 10. And even though it is unusual for the start of a post-holiday period, some futures prices have already posted declines amid weak trading and expectations for a significant improvement only from March. However, spot prices in China have increased slightly compared to last day before the holidays as most market sources still believe that the market will be better in a week’s time amid improved constructions activities and possible supportive measure from the government.

Spot prices for rebar, billet and HRC have respectively increased by RMB 13/mt, RMB 27/mt and RMB 40/mt since February 9, the last day before the holiday, according to SteelOrbis’s data. The steel futures prices for major products increased by around RMB 30-50/mt in the morning today, while they lost ground later and closed with a slight decline from the pre-holiday level. A few sources have confirmed that, even though prices are a little higher now, they are still lagging behind expectations. “I don’t see demand support. I expect the real improvement in 7-10 days,” a trading source said.

As for export prices, most have remained stable. Rebar from first-tier mills is still at $550-570/mt FOB, while offers for wire rod from second-tier mills stand at $540-560/mt FOB, with large mills insisting on $570/mt FOB. Only billet prices have inched up, by $2.5/mt on average, to $520-535/mt FOB. “Some mills voiced $535/mt FOB in offers, but this is just a nominal level, based on local market expectations,” a source in China said. The tradable level from Chinese traders is still assessed at $520-525/mt FOB. The same price is also negotiable with Indonesian producer Dexin Steel, which has for now kept its official offers at last week’s levels of $525-530/mt FOB last week, “but they are ready to negotiate. I see the real price at $520/mt FOB, and as for me it is stable,” a Singapore-based trader said.

Also, in the HRC market, most large mills either have kept offers stable (they were at $580-600/mt FOB before the holidays) or have not refreshed them at all. The tradable level is also stable for now, at $550-565/mt FOB. Market sources have been saying that traders have been in negotiations to sign deals at the same prices. “The export market had some fresh trades for flat items and the leading northern exporters have kept new base prices almost unchanged,” a large Chinese trader noted. “I am not so optimistic for now [as traditionally]. Futures prices are down, which is a bad signal. We have just come back. Expectations should be bright,” a Chinese mill commented. Offers from traders for Q195 HRC from China to Turkey have also been reported as being at the relatively stable level of $595/mt CFR today.

As for the raw materials market, the picture is similar so far. A small rise compared to the pre-holiday period, but lower than expectations and the levels discussed on Sunday, February 18, when a part of the market resumed work in advance. Iron ore fines with 62 Fe content has been at $126.2/mt CFR today, up $0.5/mt from ten days before, but around $2/mt below yesterday’ assessments by market sources.

Spot prices for major steel products, ex-warehouse