Steel
Supply and demand uncertainties buoy prices
November 2017
Chinese domestic rebar and HRC prices declined from their recent six-year highs, averaging US$594/t and US$618/t respectively. In early October prices rose following the Golden Week holidays as market participants began restocking inventories.
Chinese domestic rebar and HRC prices were mostly flat relative to previous months. Rebar prices remain below HRC prices as demand subsides, a result of slowing construction activities in some cities affected by the 2+26 restrictions. Reduction in demand is being balanced by supply uncertainties as the winter production cuts begin to affect supply. Overall, uncertainty dominated the market and traders were reportedly holding off purchasing more stock - expecting reduced prices in November. The Asian rebar price averaged US$543/t for the month, down 4.4% from September and up 66.6% year on year. Asian average HRC and CRC steel prices decreased 4.6% and 2.2% in September respectively, to US$600/t and US$620/t, month on month.

In October, the city of Luoyang in Henan province voluntarily opted into the winter production cuts, mandating a 50% cut in production on all steelmaking processes except cold rolling. Tangshan, China’s top steelmaking city enforced part of its winter production cuts a month early to counter heavy smog. Processes affected include coke making, sintering and shaft pelletising. AME expects both HRC and rebar prices to slowly decrease as a seasonal decline in demand commences. HRC is expected to maintain its premium over rebar for the short term, however this could be reversed if the infrastructure construction activity recommences in 2018 without an adequate replenishment of inventory.

The iron ore price decreased in October, dropping 13.6% to average US$60.9/t for the month. The spot premium hard coking coal price dropped in October to average US$183/t for the month.

Apparent finished steel demand in China decreased in September to 67.9Mt, a 1.6% decrease from August. Despite steel product imports decreasing 25% month on month the drop in apparent demand was underpinned by reduced steel production-the lowest since March 2017 and a 21% decrease in exports month on month. Inventory levels remain low. Rebar stocks remained flat month on month, totalling 4.1Mt in October. HRC inventories broke away from seasonal trends and increased slightly to 2.2Mt.