Steel
Supply and demand uncertainties hold back seasonal slide
December 2017
Chinese domestic rebar and HRC prices increased month on month, averaging US$626/t and US$619/t respectively. Chinese domestic rebar prices surged 5.4% to end the month at a five-year high, fueled by supply uncertainties, falling inventory levels, and increased input material costs.

Chinese domestic HRC prices increased steadily over the month, remaining lower than September’s high levels. Rebar prices have surpassed HRC prices, a result of greater than expected demand from the construction industry. The seasonal decrease in demand is being balanced by supply uncertainties as the winter production cuts begin to affect supply. The Asian rebar price averaged US$532/t for the month, down 2.0% from October and up 29% year on year. Asian average HRC and CRC steel prices decreased 0.7% and 0.8% in November respectively, to US$596/t and US$615/t, month on month.

On the 15th of November, the Chinese Government enacted the 2017-18 Winter Air Pollution Plan, mandating a 50% reduction in blast furnace production based on installed capacity in steel producing regions surrounding Beijing. Heavy smog in Tangshan, China’s top steelmaking city, has already triggered Level 2 restrictions affecting coke making, sintering and hot rolling. AME forecasts both HRC and rebar prices to remain elevated due to supply restrictions and low inventories, prices are expected to slowly decrease as a seasonal decline in demand commences. Market uncertainty threatens to add upward pressure to prices if Level 2 restrictions are triggered for extended periods during December.

The iron ore price increased 4% in November, to average US$63.5/t for the month. The spot premium hard coking coal price increased in November to average US$192/t for the month.

Apparent finished steel demand in China increased marginally in October to 68.3Mt, a 0.6% increase from September. Despite steel product imports decreasing 23% month on month the rise in apparent demand was underpinned by increased steel production and a 3% decrease in exports month on month. Inventory levels remain low. Rebar stocks dropped sharply in November to 3.3Mt, a five-year low. HRC inventories broke away from seasonal trends and increased slightly to 2.3Mt.