Steel market activity slowed down in China before the Lunar New Year holiday. This year’s holiday season has had a worrying start, with the emergence of Wuhan virus reducing the future market situation.
Background January 20/20, corona virus from Wuhan, China panicked the market before the Lunar New Year
Steel market activity has slowed down in China before the Chinese New Year holiday, although officially only lasted a week but like 2-3 weeks due to the way the travel is staggered to avoid crowded. However, this year’s holiday season has had a worrying start, with the emergence of the Wuhan virus reducing the future market situation. Everyone in the market is talking about the potential impact on building activity when the virus gets worse. Workers in Hubei Province have been asked to stay home and others are avoiding cities with increasing numbers of people infected.
In the US, demand is struggling to keep up with the soaring price of steel. Housing in the US began to be more active, up nearly 17% from the previous month to a 13-month high, showing strong construction activity.
In the European Union, steel prices are benefiting from output cuts and some downstream demand in the construction and automotive sectors.
Platts assessed HRC SAE1006 at $ 508 / ton FOB China and $ 515 / ton CFR Southeast Asia in the third week of January before the market slowed down. Chinese sellers find themselves competing with raw materials from Ukraine, although most Vietnamese buyers do not want to buy products they are not familiar with. Market sentiment is down and steel mills and traders selling into the region are hoping for more demand by the end of February.
US HRC prices were stable above $ 600 / ton but offers were constrained by a lack of buying activity. US HRC prices increased by $ 134.50 / ton compared to the bottom in October 2019. Scrap prices are expected to fall further for February and March and demand drops suggest that coil prices may be under pressure.
The northern European HRC market has seen a recovery, largely due to tighter supply from capacity cuts. But the concern is that prices may collapse when factories start rebuilding the furnace.
In India, local HRC spot prices have found some support at 38,000 / tonne ($ 536.33 / tonne) as warehouse replenishment activities have tightened supply. But the demand from end users is still not convinced.
In Turkey, long steel producers have reduced output due to slow export demand. The feasible price for rebar decreases due to lower scrap price. Platts rated Turkey’s export rebar at $ 435 / ton FOB Turkey in mid-January.
Asian rebar prices stabilize at $ 465 / ton FOB China before the market slows down before the Chinese New Year holiday. Rebar warehouses in China have increased in recent weeks due to slower construction activity during the cold months. With supply pressure and a seasonal slowdown, rebar import prices in Asia and in China may fall further in February.
Turkish scrap import prices are still under pressure from sellers who do not accept lower bids from Turkish steelmakers. Platts rated Turkey’s high-grade scrap imports 1/2 (80:20) at $ 288.50 per tonne CFR on January 21.
Asian sea iron ore prices have stabilized at around $ 95 per tonne CFR dry season during the week of Chinese New Year, supported by concerns about cyclone and rainfall supplies in Australia and Brazil.
Long steel products
The demand and strategy of Chinese factories will determine the market price direction in the first quarter of 2020.
Turkish rebar manufacturers and exporters face constant countervailing duties in the United States, a preliminary Commerce Department statement said. If completed, the new countervailing tax rate, which comes from the administrative review of 2017, will hardly be changed from the final CVD price set in July 2019 after the previous administrative review. there.
Market sources predict that 2020 will be a bit brighter for long steel producers in Europe, mainly due to stronger apparent demand, after a challenging year for end-user interest. decline in 2019.
Although market sources do not predict that 2020 will be fundamentally different from the previous year, in the context of constantly fluctuating price environments, they still expect better demand as buyers will increase inventory but also as procurement activities will continue to recover mainly in the construction sector, an important area for long steel products.
In Asia, rebar market is quiet as interest buying slows down in regional markets, Singapore and Hong Kong.
In Southeast Asia, thép Hòa Phát , a major steel corporation of Vietnam, has set a target of higher sales of construction steel in 2020, with a target of reaching 3.5-3.6 million tons by 2020. , an increase of about 26% from the 2.8 million tons the company supplies in 2019, data from the steelmaker said.
In a related news, Hilco Industrial Acquisitions, a part of U.S.-based financial services firm Hilco Global, said it bought a 500,000 tonne / year rebar mill from a steel manufacturer. Vietnam, Posco SS Vina, and added that potential buyers from India, Turkey, Egypt and other countries of the Middle East have shown interest in buying the factory.
US hot rolled coil markets have had a good start to the new year as mills remain firm with offers following price increases.
HRC prices have returned from the break in late December and early January with a new momentum amid rising scrap prices in January and steel products price increases.
In Asia, the HRC market is also firmer, reflecting higher offers from Chinese factories in a more active export market.
Most Chinese mills offer SS400 coil at $ 505 – 510 / ton for the March shipment, while a factory in northern China offers $ 495 / ton FOB but that’s for the April shipment, the Factory and trader said.
China CR coil export price also rises, along with the offers from higher mills and some buying from overseas buyers.
Platts rated HRC SAE1006 at $ 503 / ton FOB China, while on the basis of CFR Southeast Asia, the same kind of steel coil was rated at $ 515 / ton. The 1 mm thick SPCC SPCC is assessed at $ 540 / ton FOB China.
At one time, the difference between the export price of CRC and commercial grade HRC was $ 45 / ton. Factories are now reluctant to sell below $ 540 / ton FOB to CRC, which is acceptable for some end users in foreign markets, an eastern Chinese trader said. Buyers will have to catch up when prices are rising outside of China, he said.
In Vietnam, market activity remained sluggish as participants focused on evaluating new offers for the March shipment from HRC Formosa producer Ha Tinh. In line with market expectations, FHS has raised the average monthly HRC base price for March shipments to $ 520 / ton CIF Vietnam for re-rolled leather roll, up $ 35 / ton from December.
Talking about Vietnam, the big steel company, Hoa Phat expects Dung Quat steel complex in Quang Ngai province, where more than 80% of the main equipment items are built, to deploy the second operation. additional blast furnaces, each with an annual production capacity of 1.2 million tons of pig iron and a HRC rolling mill from the second quarter of 2020.
When all four blast furnaces are put into operation, Dung Quat Steel Plant will have 2.4 million tons / year of steel coil and rebar production capacity, and HRC capacity of 2.4 million tons / year.
Steel scrap and Raw materials
The international market of iron and steel scrap starts in 2020 on a downward trend in the context of more mixed psychology toward future market. Turkish buyers continue to buy February shipments at or below $ 300 / tonne CFR for premium HMS 1/2 (80:20) – transactions have been largely flat since mid-December.
However, market participants expect prices to vary, with some stabilizing prices expected to be slightly higher with high US collection prices and strong domestic markets, while others pointing to a sluggish product market in Turkey as a driver for lower prices. Turkish mills consume about 30 million tons of scrap steel per year and are buying a third of that from the domestic market.
Iron ore prices remain strong
Sea iron ore prices averaged $ 93.4 / tonne CFR in 2019, up 35% from $ 69.45 / tonne in 2018 due to China’s supply disruption and extremely strong crude steel output. The price of 62% Fe bran ore continued its strong trajectory in 2020 when factories re-stocked it before the Lunar New Year holiday.
Chinese steelmakers have been seeking higher quality ores, such as Vale’s Carajas ore and Brazil’s ore. Factories often turn to more advanced raw materials when steel profits are strong and they want to keep production levels high.
Strong metallurgical coal due to warehouse replenishment operation
The price of Asia-Pacific metallurgical coal surged early in January due to strong demand for sea coking coal coking coal in China. Platts said high-grade coking coal was up $ 9.50 / ton from a week ago to $ 152.50 / ton FOB Australia on January 10. Prices delivered to China increased by $ 9.75 / ton to $ 163 / ton CFR China. .
The spot market is more liquid as Chinese buyers try to replenish their inventory before the Chinese New Year holiday begins on January 25. Chinese steelmakers have sought to secure goods at cheaper prices. in the context of expected higher prices after Tet holiday.
In Asia, sea-plate price increases as Chinese mills raise offers to match the wider flats market and despite the gap between supply and buying guides, while buyers in South Korea remain slow to catch up.
Platts’ assessment of Q235 / SS400 steel plate, 12-25 mm thick, is at $ 488 / tonne CFR East Asia.
Trading activity is still slow after the new year holiday. On FOB China basis, offers from Chinese mills increased at $ 490-505 / ton FOB for March shipments, compared to $ 475-485 / ton FOB previously.
Crude steel production of 64 countries reported to the World Steel Association (worldsteel) increasing modestly in 2019, up 3.5% from the previous year. These countries accounted for nearly 99% of total world crude steel production in 2018.
World crude steel production will reach 1.849 billion tons in 2019, compared with 1.786 billion tons in 2018.
China leads the world in producing crude steel with a total of 996,342 million tons in 2019, accounting for more than 54% of global steel output.
China’s iron production increased by 5.3% over the previous year to 809.37 million tons in 2019, up from a 3% growth compared to the same period in 2018.
Market sources argue that the increase in Chinese crude steel and pig iron production in 2019 is due to loosening environmental protection restrictions on steel plant production, expanding capacity and strong domestic demand. strong, especially from the construction industry.
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