China’s investigations into unlicensed steel

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12 December 2016

China is conducting investigations into excess steel being produced at illegal unlicensed induction furnaces spread across various provinces through east and north China. This news has supported the steel price rise in the recent weeks as traders and buyers feel that more capacity may close down and prices would go up by atleast $20-25 per tonne, if not more.

While the natural sentiment of the market is mixed. Majority buyers have sidelined themselves with good volume of iron ore cargoes in hand, there are few who are still purchasing in moderate tonnages expecting seasonal rains in Australia in January.

Spot iron ore lost interest and yet the uncertainties helped it to remain unchanged over the week closing. Closing levels or the last traded levels were $81.15 per tonne CFR China. This is almost up by $8 per tonne since the beginning of the month.

Met coal has reversed direction relative to iron ore by slipping $14 per tonne on week closing. Its final traded price on Friday was $272 per tonne, CFR China for low vol coal. Opening up of closed mined has helped the mills to buy domestic coal at comparatively lower price to imports. This movement is termed as temporary as steel prices are still having potential to rise which may also support coking coal in coming months. From the month beginning coking coal has lost over $33 per tonne.

The impact of the Chinese steel and iron ore prices wasn’t much visible on the Turkish steel markets and HMS 1&2 (80:20) scrap held steady at $266 per tonne at week closing. Extreme cold weather in these markets is keeping the steel unpredictable.

Thermal coal slipped down to $77.21 per tonne FOB South Africa (RB1 6000 NAR) which is not being seen as a major market impactor.  The market for thermal is going through a radical shift as per the traders and with the opening up of US coal mines, more availability of domestic coal in India and closure of some European mines, there is a big shift in the prices expected towards late 2017.

Driving into the Chinese steel domestic steel prices, there is no visible change in the market. Billets were hung steady at $405 per tonne, rebar at $440 per tonne and HRC at $513 per tonne. All on FOB basis as recorded on week closing Friday.