Capesize

17950

Sep-17
0.00 0.00%

Panamax

11175

Sep-17
225.00 2.05%

Iron Ore

76.5

Sep-17
0.85 1.12%

Sing 380

278.25

Oct-17

Coking Coal

208

Sep-17
0.00 0.00%

Nola Urea

212.5

Sep-17
0.00 0.00%

Market hibernates as steel demand wanes


This week, the steel prices retreated in view of the slowdown of construction activities in China. Tangshan billet prices have plunged to RMB 3,840 on Wednesday, 20 Dec 2017, down RMB 110 since its opening price in the week at RMB 3,950 on Monday, 18 Dec 2017.

The previous rally in rebar and iron ore futures also lost steams this week, mirroring a downward prices correction in the physical market. As such, the price for benchmark 62% fines fell 0.3% to USD73.93 per tonne on Tuesday, 19 Dec 2017 based on the Metal Bulletin assessment, pulling back after rallying 6% in the previous two sessions.

Despite waning demand of steel which left a deep impression on the slide of iron ore prices, the coking coal market appeared immune to the decline and instead featured high prices due to their own supply tightness situation.

 

High iron ore inventory among Chinese mills

It was estimated that an average Chinese mill held around 1-3 weeks of iron ore inventories, while the bigger mills kept around nearly two months’ worth of inventories. These high inventories were the result of Chinese mills’ stockpiling of huge quantity of iron ore inventories ahead of the winter season and even for the upcoming Spring Festival.

Besides, a trade sources indicated that there was around 143 million tonnes of iron ore available among the Chinese ports, providing little incentives for mills to import iron ore. Many of the port inventories consisted of the high-grade materials such as the Carajas fines.

 

Top Japan’s steelmaker raises prices on steel products

Despite the slowdown in construction activities of China, top Japanese steelmaker, Tokyo Steel Manufacturing (TSM) announced that it would raise product prices for the second straight month in January on Monday, 18 Dec 2017.

For instance, TSM will raise the prices for steel bars, including rebar, which will increase by JPY 3,000 or USD 26.63, up 4.6%, to JPY 68,000 per tonne (USD 603.55 per tonne), while prices for U-shaped steel-sheet piles are slated to increase by JPY 3,000 or 3.1% to RMB 99,000 per tonne.

The price hike was a response to the tight supply in the domestic market and aboard as well as expectations for higher market prices in the near term. Moreover, TSM has projected the higher steel demand in Japan due to the infrastructure build-up toward Olympic 2020.

 

Japan to increase steel production in 2018 for Olympic

Japan’s steel output is slated to increase in the 2018-2019 fiscal year, due to the build-up demand for the 2020 Olympics. According to Japan Iron & Steel Federation (JISF), the Japanese crude steel production may hit over 106 million tonnes for the fiscal year of 2018 starting in next April.

The increase of the steel output will increase the country’s appetite for coking coal and iron ore, both the important components for steel-making. Besides these two components, Japan might import additional iron ore pellets for next year as buffer from sintering disruptions in steel-manufacturing.

Previously, Japanese steel production was at 104.8 million for fiscal year of 2016, almost at similar level as of 2015, but lower than the high output level seen in 2014 at 110.6 million tonnes.

 

India is not a second China on steel demand, says Worldsteel

India’s steel demand will require a longer time to replicate China’s explosive growth, according to Worldsteel. The industry body stated that India’s model is very different from China, being more “inward-looking and environmentally conscious” as compared to the latter.

In comparison to China, the steel demand in India will be less steep and takes a longer time to peak. For instance, India’s steel use grew at 7.43% during 2011-2016, while its GDP rose on average of 7.34%. However, steel demand in China grew at a rate which was much faster than its GDP during the take off period.

Besides, Worldsteel concluded that Indian steel growth will be characterized by more service-oriented, inward- looking, more environmentally conscious with a stronger focus on equity and less controlled by a strong central government as compared to China.

 
More stainless steel output recorded in Jan-Sep 2017

International Stainless Steel Forum (ISSF) stated that the global stainless steel melt shop production had increased by 7.4% year-on-year to 36.1 million metric tonnes (mt) in the first nine months of 2017.

Among the global production, China accounted nearly half of the global output at 19.7 million mt for the Jan-Sep 2017, up 8.8% year-on-year. According to the Brussels-based ISSF, the stainless steel production grew at a fastest pace set by the U.S., up 14.8% year-on-year to 2.1 million mt during the first nine months of 2017.

 

China sees robust import of iron ore and coking coal for 2017

China’s iron ore imports are set to reach 1.07 billion mt in 2017, up 6% year-on-year, according to shipping service firm Clarkson.  In the meantime, Chinese coal imports are estimated to hit 220.2 million mt by the end of 2017, up 10% year-on-year and the country may see the highest coal import in December at 28 million mt or a 4-years high since 2013.

The increase in imports pointed to strong Chinese demand for the two commodities in steel-making, where the margins remained lucrative for mills due to high steel prices. China’s stricter anti-pollution measures also supported the import market for high grade ores in replacing domestic ores for furnace feedstocks.

 

Chinese domestic coal miners to raise prices over transportation disruption

Transportation disruption in China may prompt more domestic coking coal miners to raise prices. According to trade sources , the winter conditions in China has resulted fewer trucks and trains to transport coals inland from mines to end-users.

A domestic miner was heard to raise coal prices by RMB 100/mt on last week, and the other domestic miners may follow for the price hike by letting buyers to bear the high cost of transportation during winter period.

Moreover, the domestic coking coal prices may go up further as Chinese coal miners might reduce their production on light of a recent mining accident that injured 20 workers in Guizhou, China.

Meanwhile, the seaborne coking coal prices were kept high by the delays in Australia’s Dalyrymple Bay Coal Terminal (DBCT). On last Friday, 15 Dec 2017, it was heard that around 57 vessels were still queuing up at the terminal.

 

No coking coal restocking demand in East Asia

Seaborne coking coal demand remained mixed as mills are well-stocked for the moment. According to trade sources, the steel mills across North Asia, namely in Japan, South Korea and Taiwan have adequate coking coal inventory and have no restocking requirements.

However, the buying interest may come from the Indian traders but they are likely bid no higher than USD245/mt FOB Australia for a premium mid-vol coal with 67-69% CSR. Besides, most of the Indian traders expected the prices to rise in the near term.

Some of the Indian traders may not commit to purchase immediate and may wait for the next few months before procurement.

 

Strike in Australia’s Port Kembla disrupts coal supply

A strike in Australia’s Port Kembla coal terminal on Thursday, 21 Dec 2017 might escalate to work stoppages over Christmas. According to a spokeswoman for Port Kembla coal terminal, the operation staffs of the terminal’s strike will cause three full day stoppages period over Dec 25-26, then Dec 27 and on Dec 28-29.

Based on the port data, the coal terminal handles around 10 million mt/year of mostly metallurgical coal exports from six miners in New South Wales’ southern and western coalfields, including Centennial, Glencore, Peabody and South3.

The coal terminal operator has so far been negotiating with the operation staff for a new enterprise agreement over 2 years and nine months but talk reached a roadblock last week and prompted the industrial action from the workers.

 

Port delays along the China-Australia shipping route

Around 300 vessels were waiting outside Australian and Chinese ports, queueing up to unload their coal or iron ore cargoes. Some 80 vessels were heard to be anchored outside congested Australian ports for over a period of 20-25 days. More specifically, the congestion in Hay Point and Dalrymple Bay in Australia were a result of poor port maintenance as well as repairing works caused by Cyclone Debbie in March 2017.

It was estimated the delays in these two ports held back 76 Capesize and Panamax vessels where some of the waiting vessels took around six weeks to unload cargo. One trade sources expected the easing of the congested Dalrymple Bay to occur only in January next year. For China, some anchorages outside Zhoushan-Ningbo such as Changjiangkou and Bayuquan were subjected to closure for 2-3 days at one time due to bad weather conditions.

 

Verdict

Overall, the market seems to take a winter break or away for Christmas holidays at a time being. The steel demand outlook over the New Year seem to be strong, with steel body associations backing on it. But from now till then, it will be interesting to see how the supply of coking coal unfold, especially with port congestion, workers’ strike in terminal. Anyway, Merry Christmas to all!