Posted on 26 Apr 2023
Futures prices of major ferrous commodities in China including steel, iron ore, coke and coking coal extended their losses on April 25, with all contracts closing lower when their daytime trading sessions ended. Market sources blamed the mismatch between steel supply and demand and the prevailing pessimism for the sustained fall in ferrous futures prices.
On Tuesday, the most-traded rebar and hot-rolled coil contracts on the Shanghai Futures Exchange (SHFE) for October delivery closed at Yuan 3,685/tonne ($532.6/t) and Yuan 3,752/t respectively, down for the fifth consecutive working day and by another Yuan 58/t and Yuan 61/t from their settlement prices on Monday.
Meanwhile, the prices of key steelmaking inputs posted even larger declines, with the most-traded iron ore contract on the Dalian Commodity Exchange for September delivery losing nearly 2% or Yuan 13.5/dmt from Monday to close at Yuan 711/t on Tuesday.
In parallel, the Dalian bourse's most-traded September contracts for coke and coking coal continued declining, with the former dipping by another 2.3% and the latter by 1% from Monday to close at Yuan 2,208/t and Yuan 1,473.5/t on Tuesday.
At the same time, Chinese steel prices in the physical market have also kept softening. For example, China's national price of HRB400E 20mm dia rebar, a barometer of the country's spot steel-market sentiment, had dropped for five working days in a row by Monday. The price lost another hefty Yuan 47/t on day to touch a 5.5-month low of Yuan 3,904/t including the 13% VAT, according to Mysteel's assessment.
The continuing price declines have largely eroded the profit margins that Chinese steel producers were enjoying, with Mysteel's recent survey among 247 steel mills nationwide showing that their profitability on steel sales had eased for three consecutive weeks to 42.42% as of April 21.
In response to thinner or even negative profit margins and lacklustre steel demand, many Chinese steelmakers have opted to overhaul their steelmaking facilities rather than produce. By April 25, more than 30 Chinese mills surveyed by Mysteel had plans to either reduce operations on their blast furnaces or bank them entirely, the responses showed.
Source:Mysteel Global
