Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Returning from a week-long golden week holiday, Chinese steelmaker Baosteel has lowered the prices of finished flat steel deliveries by CNY100/mt ($15/mt) for November against the October delivery prices. 


The steelmaker has attributed this price cut to adjustment in the iron ore import prices and weak demand outlook towards this calendar year-end. On Oct 9, the steelmaker announced a price cut for HRC and CRC products. Chinese Government has also implemented winter restrictions resulting in production cuts effective Oct 1.  


Chinese steel demand is expected to remain strong post-Golden Week holidays, driving steel futures and, consequently, physical markets up. Chinese domestic billet prices jumped to CNY3410/mt ex Tangshan, up CNY30/mt from Friday and CNY110/mt from bottom reach before the holidays.  


For October deliveries, the blast furnace maker had raised domestic ex-factory prices for HR and CR products by CNY50/mt ($7/mt) and CNY200/mt ($30/mt), respectively. The gap between CRC and HRC would stay widened by CNY600-650/mt. The inventories of HRC remain high with local steelmakers but CRC inventories are depleting fast.  

“Chinese finished steel prices had marked the fourth consecutive monthly price hike in October. It can thus be considered as an adjustment in the prices rather than drop,” said a trader in Singapore.  


In the domestic market, HRC prices were reported at CNY3,900-4,000/mt ex-works eastern China. HRC export offers jumped by $10/mt post-holidays to $510/mt fob China, however, the industry awaits more trades to materialise. Although Chinese demand is showing signs of recovery, its immediate impact on Asian and international prices seems limited as these countries still await end-user demand to pick-up due to post-COVID-19 issues.  


Iron ore prices still have room to soften 

The spot price for imports of benchmark Fe 62pc content iron ore was at $125.5/mt cfr Qingdao after the Golden week, with prices climbing by upto $10/mt amid restocking activities pre and post-holidays. There is scope for prices to soften in the coming days.  


Baosteel remains upbeat about downstream industry demand in the second half of 2020. It is unlikely to boost the company’s profitability amid a limited rise in exports and domestic steel prices from the prior year. 


A sharp rise in input costs has affected profitability.  Other major competitors in South Korea are also waiting for the domestic demand to pick-up. Baosteel’s HRC prices set the benchmark for Asian HRC producers like POSCO and Hyundai in South Korea, Formosa Steel in Vietnam, and JSW and Tata Steel in India.  





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