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Asia-Pacific ferrous markets defy global declines

09 Feb 2018 11:19 GMT
Asia-Pacific ferrous markets defy global declines

Singapore, 9 February (Argus) — Asia-Pacific ferrous markets have rallied in February as Chinese steel mills restock ahead of spring construction demand, defying declines in other commodities such as oil and copper.

Prices for steel and its raw materials have sidestepped the turmoil in other markets, supported by the seasonal uptick in demand from March and tightness in coking coal and coke supply.

Chinese steel output and inventories hit year lows in December and January as construction in the north of the country slowed. Steady real estate investment growth and the impact of last year's aggressive cuts to steel overcapacity are expected to keep China's steel markets firm in 2018.

"I am quite confident about the post-holiday market," a Singapore-based iron ore trader said. Warehouse steel inventories are lower than a year earlier as a result of the shutdowns of illegal scrap-based mills, which is likely to support prices when construction demand ramps up.

The 62pc ICX iron ore fines index rose by 7pc to $78.10/t cfr Qingdao on 7 February from $72.80/t on 31 January. Prices have eased over the past two days, dropping to $76.90/t today, as trade slows with market participants travelling ahead of the 15-21 February lunar new year holiday.

China's iron ore imports rose to their second highest level on record in January at 100.34mn t, up by 19pc from December, putting imports on pace to again exceed 1bn t in 2018.

Coking coal prices have seen the sharpest gains, driven by China's re-entry into seaborne markets after domestic supply tightened more than expected. A shortage of natural gas in north China for winter heating has led to authorities prioritising thermal coal railroad shipments over coking coal.

Premium hard low-volatile coking coal prices into China have risen by 11.7pc, to $234.20/t cfr China from $209.60/t on 25 January. First-tier fob Australia prices have gained by 7.5pc to $226/t fob Australia today from $210.20/t on 30 January.

Chinese export steel prices held flat in January as exporters looked to remain competitive in Asia-Pacific markets, before heading higher in February. Seaborne markets have been supported by a rise in China's domestic prices on post-holiday expectations, after bottoming out in mid-January. Delivered hot-rolled coil (HRC) prices have risen by 7.5pc to $617.40/t cfr Asean today from $574.10/t on 24 January. Chinese export rebar prices increased by 3.2pc since 31 January to $550.40/t fob Zhangjiagang today.

Tangshan billet has risen steadily from a recent low of 3,490 yuan/t on 15 January to Yn3,610/t today.

By contrast, prompt-month Brent crude futures have fallen by 7.4pc to $64.81/t yesterday from $69.65/t on 1 February, while Chinese May copper futures have fallen by 2.9pc to Yn51,740/t over the same period. On equity markets, the US S&P 500 fell by 8.5pc from 1 February until yesterday while the Shanghai Composite Index has now fallen by 9.2pc this month.