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

China’s steelmakers have hiked domestic steel prices by CNY50-70/mt ($7-10/mt) for late-March shipments on higher demand. Resumption of construction activities in China, which are now at pre-COVID-19 levels have boosted demand for steel in the local markets. 


As part of its economic relief package, China released a 1trillion yuan ($142.4 billion) in special bonds on March 19. Around 85pc of this fund will be invested in infrastructure projects. This move has boosted market sentiments despite a dip in steel futures markets. 


Shagang Steel, in Jiangsu province, raised its long steel prices for domestic sales in the last week of March. The company had lowered finish steel prices sharply for early March deliveries and held prices flat for mid-March deliveries. For March 21-31 deliveries, the company’s rebar HRB400 of 16-25mm diameter will be priced at CNY3,700/mt ($520/mt). The steelmaker held its HPB300 6-10mm high-speed wire rod prices at RMB3,970/mt, inclusive of local taxes. 


Following the lead of major steelmaker, Yonggang Steel raised rebar prices for mid-March deliveries by CNY70/mt to CNY3,700/mt inclusive of local taxes (VAT). Zenith Steel increased rebar prices by CNY100/mt to CNY3,700/mt. 


Domestic rebar prices were at CNY3,500-3,530/mt ex-mill and the export offers were at $445-475/mt fob China. Domestic HRC prices were largely stable, though, export prices are likely to drop amid competitive prices from the other markets. Also, rebate for HRC has increased to 13pc from 10pc which means mills have room to cut prices by $10-15/mt. 


Ferrous scrap dips 

Mills in China lowered their domestic scrap procurement prices successively twice on March 22 and 23. Domestic ferrous scrap prices dropping in total by CNY60/mt for all deliveries. In order to balance excess supply and thinned profit margins, mills have lowered scrap prices despite an increase in finish steel prices. A steelmaker headquartered in Zhangjiagang, Jiangsu province, paid CNY2,640/mt for HMS 2 and CNY2,690/mt for HMS 1 to domestic suppliers, including delivery and the 13pc VAT. 



Domestic manufacturing and construction activities are picking up as the Chinese government lifts lockdowns, but the steel sector in China is challenged by the large volumes of steel stored as semi-finished products. Market will face liquidity crunch if the finish steel inventories do not drop rapidly. China’s finished steel output fell by 3.4pc or 6mn mt during the Jan-Feb period, while crude steel output rose 3.1pc or 5mn mt from the prior year period. These numbers indicate that a large part of the crude steel production is stored as the semi-finished products.

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