Industry archive · Originally published: 2019-12-20. This archived article does not reflect current market conditions or policy.
Previous week’s market summary
Steel supply: weekly rebar output rose to 3.3069 million tonnes, up 5.84% compared with 2018, with the increase widening. East China saw the clearest growth at 10% year on year. Tangshan blast furnace utilization rose by nearly 3 percentage points to 53.97%. Hebei rebar output increased 8.79% week on week and about 9% year on year.
Improved northern air quality and the conclusion of national meetings eased environmental production restrictions on blast furnaces and sintering furnaces. Some mills resumed production. Falling ore prices widened steel margins and long-process rebar output rebounded. All-scrap electric furnace rebar costs were RMB 4017 per tonne in East China, RMB 3699 in Central China and RMB 3970 in South China. The national average fell slightly to RMB 3892 per tonne, opening profit margins relative to spot prices and encouraging further recovery. Output pressure was relatively high. Social rebar inventories in 35 cities fell 5.78% to 9.1694 million tonnes, with destocking accelerating and inventories 11.57% below the prior year. March saw a third consecutive week of faster social inventory declines, especially in Southwest, East and Central China. Shanghai and Hangzhou demand began recovering, with inventories falling 5.68% and 7.77%, respectively, over the week.
Demand: infrastructure project starts and post-holiday construction activity recovered well in March. January-February property data showed investment growth remaining high, but new-start growth slowed and land purchases turned negative, indicating weaker longer-term momentum, although short-term support remained. Infrastructure investment growth of 2.5% in January-February also supported prices. Once destocking stabilized, rising output was expected to put pressure on steel prices.
Iron ore: on March 19, VALE announced that it had received approval from the Minas Gerais inspection authority to resume operations at Brucutu and the Laranjeiras tailings dam, together with environmental approval. As of March 15, combined Australian and Brazilian shipments increased by 0.75 million tonnes to 20.771 million tonnes, down 7.49% year on year. Australian shipments rose by 1.18 million tonnes to 16.201 million tonnes, down 8.59% year on year. Brazilian shipments fell for a second week by 0.43 million tonnes to 4.57 million tonnes, down 21.11% year on year. Combined shipments remained significantly below the previous year’s levels.
Vale announced approval to resume activities at the Ilha Guaiba maritime terminal in Mangaratiba, supporting an expected recovery in Brazilian ore shipments. In the short term, mill sinter fines inventories and daily consumption were historically low. As heating-season restrictions ended and furnaces under maintenance returned, expected restocking supported the iron ore 05 contract, while more distant contracts remained weaker.
Futures spreads:
The rebar 05-10 spread narrowed from 279 to 256, still relatively high against the historical seasonal level. The 10-01 spread widened from 175 to 183. The rebar/ore ratio for the 05 contracts increased from 6.0 to 6.1, and the 10/09 ratio from 6.0 to 6.2. The hot-rolled coil/rebar spread increased from -90 to -56 for 05 and from -51 to -47 for 10, with both remaining historically low for the season.