Category Archives: HRC

China’s industrial firms’ gross profits up 67% in H1 CY’21

For the first half of 2021, China’s sizable industrial firms saw their gross profits surge by 66.9% on year or 45.5% higher than the corresponding period of 2019, according to the latest release by the country’s National Bureau of Statistics (NBS) on July 27, reflecting the strong recovery in demand and their overall performance, and bulk commodities sectors did post higher gains.

In H1, these industrial firms’ gross profits totalled Yuan 4.22 trillion ($651 billion), while for June alone, the growth in the sector slowed down further, up 20% on year to Yuan 791.8 billion against the 36.4% on-year gain for May, according to the NBS.

“In H1, industrial enterprises saw their profits recover steadily and their businesses had also improved, but among them, privately-owned and small and micro enterprises had shown a relatively slower recovery in profits,” Zhu Hong, the NBS’s senior statistician, was quoted in the release commenting.

“In addition, high bulk commodities prices have been squeezing enterprises’ profits,” she highlighted. Bulk commodities in question include steel, copper, and aluminum, according to Beijing’s repeated warning on the high prices.

The country’s nonferrous smelters and fabricators, for example, posted the second fastest growth in profit among the 41 sectors, up 272.8% on year to Yuan 140.4 billion in H1, while its upstream – the mining and processing sector saw its profit grow by 83.5% on year to Yuan 23.6 billion.

The growth in profits among China’s steel mills and fabricators was ranked the fourth, up 234.1% on year to Yuan 267.1 billion, and its upstream mining sector posted an 187.9% on-year gain in gross profit to Yuan 38 billion, according to the official statistics.

In H1, among the country’s 41 industrial sectors, 36 saw their profits gain by at least two digits on year, seven reported their profits more than doubling on year, while compared with the same period of 2019, 29 industrial sectors’ gross profits grew, the NBS data showed.

Among all the 41 industrial sectors, petrochemical plants ranked the top in terms of gross profits, totalling Yuan 380.4 billion in H1, or up 176.8% on year, and computer, telecommunication and other electronic devices sector ranked the second with the profits up 45.2% on year to Yuan 345.2 billion, and pharmaceutical sector the third with the profits up 88.8% on year to about Yuan 300 billion, according to the official data.

Written by Rong Zhang, zhangronga@mysteel.com

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.

 
China steel export duty

Rumours on China’s expected steel export tax grow louder

The much-awaited steel export tax from China may soon become a reality. There is no official announcement yet but the rumours, which have been floating in trade circles for the last two months, have gained further momentum of late. Market sources told SteelMint, China may increase the export tax rate of some steel products on 1 Aug’21. The tax on hot-rolled products may increase from 13% to 20%, and that cold-rolled products and galvanised steel, which had nil tax so far, may now see an 11% tax imposition, while the rebar export tax rate could be hiked to 20% from the current 13%.

If imposed, it will be the second time in CY’21 that China will be adjusting the export tax rate on steel products. Since 1 May’21, China has cancelled the export tax rebate on some steel products, and slapped an export tax rate of 13% on carbon steel.

Mills quiet

A direct impact of this rumour is that the Chinese HRC export market has been quiet since the last few weeks with most mills holding back offers. Whatever was being offered was only from the larger mills, but at very elevated levels, at which no deals were concluded. Some of the HRC offers are currently at $1,030/tonne (t) FoB while CRCs were nudging $980/t FoB levels. Towards the beginning of Jul’21, the HRC export offers were in the range of $930-940/t FoB.

Affected by the cancellation of the previous round of export tax rebates and the continuous increase in domestic steel prices, China’s HRC export offers rose 27% in April-May’21. The offers even once touched $1,050/t.

After mid-May, due to the decline in domestic steel prices, China’s steel export offers softened. Attracted by the notable price gaps between domestic and overseas markets, China’s steel exports remained at a relatively high level from May to June.

Disincentive for mills

The move, if announced, will be a direct fallout of the strong steps taken by China to reduce crude steel production within the country. China is keen to keep its CY’21 crude steel production at CY’20’s level of around 1 billion tonnes.

The production cuts will necessitate that finished steel output remains within the country for China’s own domestic use, especially since it has gone into developmental mode post-pandemic with a thrust on the infrastructure and automobile sectors. Therefore, at this juncture, the export tax will strongly dissuade mills from exporting.

China, in a synchronised manner, has been taking steps to curb industrial pollution. The production cuts, withdrawal of the 13% export rebate on 146 steel products in May’21, crackdown on commodity inflation are all part of the twin macro policy of cleaning up the environment and focusing on quality steel development.

Already, thanks to strict production cuts, blast furnace capacity utilisation has dipped to 88% while the same for its electric arc furnaces has dropped to a three-month low.

China’s steel exports

China’s total flat products exports, meanwhile, have risen 32% in Jun’21 to 4.67 million tonnes m-o-m against 3.54 mn t in May’21. Longs exports increased 5% to 0.99 mn t from 0.94 mn t in the same period.

In CY’20, China’s total steel exports were about 53.67 mn t. In H1 of CY’21, total steel exports have reached 37.38 mn t, of which flat steel accounts for 65%. Plate products, mainly coated strips, HRCs and CRCs account for almost half of China’s steel exports. Therefore, if steel exports flow back to the domestic market in H2, supply of flat steel will increase significantly.

Outlook

If the HRC export tax is increased by an additional 7% to 20%, the export cost will increase by $60-70/t. For CRCs, the 11% tax will increase the export cost by $100-110/t, which will greatly reduce the competitiveness of China’s steel exports,” a source from China informed SteelMint.

Prices as on 8:50 IST, 28 Jul. d-o-d changes indicated against closing price of 27 July

 
SteelMint’s India HRC export index stands at $888/t FoB east-coast basis, reporting a drop of $8/t

India: SteelMint’s HRC export index drops marginally, active bookings reported

Rumours of a hike in Chinese steel export tariffs have resulted in Chinese mills keeping away from actively offering HRCs for export, benefitting Indian players. SteelMint’s India HRC export index stands at $888/t FoB east-coast basis, reporting a drop of $8/t as against $896/t FoB seen a week ago.

Mills have actively concluded HRC export deals to South Korea and Vietnam for Aug-Sept shipments. However, firm price indications/offers were heard for Middle East and Turkey as well.

Recent deal concluded:

  • A major government-owned steel mill has booked 20,000 t HRC (SS400) for exports to Vietnam. The deal was concluded at around $915/t CFR basis for Aug-Sept’21 shipment.
  • Last week major integrated steel mills booked over 30,000 t of HRCs to South Korea at around $945-950/t CFR basis for Aug-Sept shipments.
  • Mills are offering HRCs for the Middle East at around $970/t CFR basis and Turkey at about $950-955/t CFR basis. However, no major deals have been concluded this week.

Rationale: Eleven indicative prices were considered as T2 inputs and one deal is considered as T1 input. Deals booked for South Korea are not considered for index value. The final price was an average of T1 and T2 inputs which stood at $888/t FoB. The CFR prices were converted to FoB equivalent by deducting freight costs from the buyer/seller.

Global HRC market overview

1. Chinese mills hold back from offering over export tax concerns- The Chinese steel mills have refrained from quoting offers this week. The market went abuzz with speculations over an official announcement regarding the export tax to be made in early Aug’21. The previous week’s levels for Chinese HRC (SS400) stood around $940-950/t FoB basis. Yet, some tier-I mills have been quoting offers at higher ranges of $1,000-1,030/t FoB. Also, the typhoon IN-FA has disrupted both the land and sea-side logistics in the eastern provinces of the country.

2. CIS-origin HRC offers decline w-o-w- The offers for CIS-origin HRCs saw a decline of around $5-10/t. The current week’s assessed offers stand at around $915-930/t FoB Black Sea as against $920-940/t FoB a week ago.

3. Imported HRC offers to Vietnam range-bound- The imported HRC offers to Vietnam have remained similar to those seen in the previous week. Increased restrictions due to the lockdown till 1 Aug’21 in Ho Chi Minh City (HCMC) and the economic hub-cum-capital Hanoi have dented the demand in the country.

Offers from major exporting countries:

  • Indian mills are offering HRCs in the range of $930-935/t CFR Vietnam.
  • Russian mills continued offering at $890/t CFR. The export tax shall be effective from 1 Aug’21, which has kept the offers still at a discount.
  • Chinese mills did not quote offers this week amid rumours about an official announcement regarding the export tax levy.
  • There were no offers from Japan and South Korea for this week.

4. Japanese mill books 20,000 t of HRCs for exports to Pakistan: A Japanese steel mill was heard to have booked 20,000 t of HRCs for exports at $1,060-1,070/t CFR Pakistan for Aug-Sept’21 shipment. Meanwhile, South Korea is offering HRCs at $1,065/t CFR and Taiwan, at $1,080/t CFR basis.

India: SteelMint's HRC export index drops marginally, active bookings reported

 

S. Korea: Hyundai Steel expects construction, auto sectors to propel steel demand

South Korea’s leading steel producer, Hyundai Steel, expects steel demand to increase in 2021, especially from the construction and automobile sectors.

  • Investment in the construction sector is expected to grow marginally by 1.6% y-o-y to KRW 268 trillion. Strong domestic demand and the government’s new housing plans are likely to support growth in the sector.
  • The automobile sector is expected to normalise due to easing semiconductor supplies. Auto producers may recover from disrupted production in H2 CY’21. Production may increase by 6.8% to 3.8 million units.
 

India’s steel imports declining since FY’19: Steel Minister

India’s steel imports have been on the decline in recent years, the government told Lok Sabha on 26 Jun’21.

  • The share of imports in domestic consumption fell to 5% in FY’21 from 6.8% in FY’20 and 7.9% in FY’19. The share fell further to 4.7% in the first three months of the current fiscal.
  • Government data showed that domestic consumption stood at 98.71 mn t in FY’19, 100.17 mn t in FY’20, 94.89 mn t in FY’21 and 24.58 mn t in the first three months of the current fiscal.

“The demand for steel in the country is being predominantly met by domestic production and the percentage share of import in consumption has been gradually declining for the last three years,” Union Steel Minister Ram Chandra Prasad Singh said in a written reply in the Lok Sabha.

 
Vietnam: Imported HRC market moderate on bleak demand

Vietnam: Imported HRC market moderate on bleak demand

Imported HRC offers remained largely moderate this week due to the absence of active trades, mainly from China and India. Meanwhile, domestic mills are planning to export HRCs since end-users in Vietnam are less likely to make fresh bookings at the moment. Also, despite cheaper HRC offers from Russia, Vietnam mills have not made any recent booking for Sept-Oct’21 shipments.

Current offers from major exporting countries

  • Offers from private Indian mills are hovering at $925-930/t CFR, a moderate decline from $930-940/t a week ago.
  • State-owned SAIL is heard to have resumed HRC export offers to Vietnam for Aug-Sept’21 delivery. The company is offering HRC (SS 400) at around $900/t CFR Vietnam.
  • Russian mills are still offering at $890/t CFR as the export tax of 15% shall come into effect from 1 Aug’21.
  • Last week, China’s HRC export offers stood at $930-940/t CFR. However, no firm offers were heard today in the market.

Why buying has turned slow in Vietnam?

1. Slowdown in demand- Downstream industrial demand in the country continues to remain sluggish due to stringent lockdowns since the beginning of the month. “The sales in the domestic market have slowed down by around 20% since June,” SteelMint learned from a few reliable Vietnamese market sources. Also, the ongoing monsoon has dampened demand in Vietnam.

2. Lockdown due to Covid-19 delta variant- The steel hub of Vietnam, Ho Chi Minh City (HCMC), has been locked down since 9 July’21 over a spike in cases. The term of the lockdown has been further increased from the initial two-week period till 1 Aug’21.
Meanwhile, the country’s capital, Hanoi, is also witnessing some of the strictest social distancing regulations over infection concerns. The country has been seeing a spike in new Covid-19 cases of over 1,500 for the past couple of weeks.

3. Domestic mills reduce HRC offers over dull demand- Over the above-mentioned concerns, domestic manufacturer Hoa Phat has slashed HRC offerings by $50/t for Sep’21. Current offers stand at $920-925/t on CIF basis for Sept ’21 deliveries. The official announcement was made towards the end of the previous week. Furthermore, Hoa Phat is planning to export HRC in the upcoming weeks to offset the slow demand in the domestic market. Along with this, Formosa Ha Tinh also slashed its HRC export offers by $60/t m-o-m. Currently, the mill is offering HRC (skin passes) at $970/t CIF Vietnam, which were around $1,030/t CIF for Aug’21 shipments.

Vietnam: Imported HRC market moderate on bleak demand

Will imported HRC offers increase in the near term?
The Chinese mills are expected to continue to keep their HRC export offers elevated amid the anticipated announcement of the export tax in early Aug. Also, the market is speculating an increase in the Russian HRC offers in the upcoming few weeks with an export tax of 15% coming into effect from 1 Aug’21.

Meanwhile, Indian steel mills continue to explore export opportunities due to higher price realizations over domestic sales.

 

World crude steel production up 11.6% y-o-y in June’21

The aggregate crude steel production of 64 countries stood at 167.90 million tonnes (mn t) in June’21, as per data released by the World Steel Association (worldsteel).

The output volume increased by 11.6% against 150.45 mn t a year ago. Recovery in most of the global economies in CY’21 and the global spread of Covid-19 during Mar-June’20 with stringent lockdowns is relatable to this increase.

In Jan-June’21, the accumulative output stood at 1,003.90 mn t, up 14.4% y-o-y.

SteelMint analyses production of the top three steel producing nations:

1. China’s crude steel output up 6.6%: China’s steel output stood at 93.90 mn t in June’21, up by a mere 1.5% against 92.51 mn t in the corresponding period last year (CPLY). There were several factors that restrained growth in China’s steel production.

  • Production cuts: The government’s prime focus on improving air quality has largely impacted production volumes in both years. However, continual extension of production curbs after Sept’20 played a major role.
  • Restricting exports to bring down excess capacities: The largest steel producer in the world took the path of cutting out excess capacities, with the government intervening by removing the export rebates of 13% from steel products effective from May’21. Further, the government openly stated its intent to levy an export tax by end-May’21 but is yet to come up with an official announcement on the same.

During H1CY’21 (Jan-Jun), China’s crude steel output aggregated to 563.30 mn t, up 11.8% y-o-y compared with 503.85 mn t in CPLY.

2. India crude steel output up 21.4% y-o-y: India, the second-largest steel producing nation, churned out 9.40 mn t more in June’21 against 7.74 mn t in the preceding year.

The country continued to battle the fierce second wave of Covid with sporadic lockdowns and limited hours of market activities since new cases picked up pace in early Mar’21. However, increased speed of vaccinating citizens in the country led to a gradual opening up of the markets by June.

a) Ramp-up in capacity utilisation rates: Major private Indian steel producer JSW managed to keep its utilisation rate at 91% in June’21, significantly up against ~25% in CPLY and 76% in June’20.

The production volumes had slumped last year owing to stringent lockdowns across the country and the labour exodus. However, the company raised its capacity utilisation rate in CY’21 due to improved downstream demand with a gradual return of labour this year.

b) Steep hike in export offers on the year: Higher demand along with higher realisations in the overseas markets, especially the UAE, Vietnam and Europe, led to a steep hike in Indian HRC export offers.

SteelMint’s Indian HRC FoB export offers spiked to $989/t FoB east-coast basis in June’21 contrasted against $435/t FoB in the same period last year. However, these have come down from the highs of $1,027/t FoB in May’21.

Meanwhile, during H1CY’21, output moved up 31.1% to 57.90 mn t against 44.10 mn t in CPLY.

3. Japan’s crude steel production spurts 44.4% y-o-y: Japanese mills produced 44.4% more of crude steel at 8.10 mn t in June’21 in comparison to 5.61 mn t in CPLY. Also, in Jan-June’21, production rose by 13.8% y-o-y to 48.10 mn t compared to 42.27 mn t in Jan-June’20.

The country has been on a recovery track with manufacturing activities picking up with the easing of Covid concerns although some restrictions are still there.

Meanwhile, infrastructure and other construction activities linked to Tokyo Olympic preparations were expedited which boosted demand a bit during the term.

Outlook
Steel production across the globe shall see a shift as the world’s largest producer, China, is cutting down on capacities to meet the carbon neutrality status by 2060. But other nations are looking to add more capacities. The Indian steel industry is working towards expansion with steel demand forecasted to improve in the coming years.

Thus, it would be interesting to see how much of a difference this shift will bring in the overall steel production volume in the near future.

 

Uncertain fundamentals to test China’s steel prices – CISA

Chinese domestic steel prices are expected to fluctuate in near term with the changes in fundamentals as both supply and demand may slow, according to the monthly release of the China Iron & Steel Association (CISA) on July 21.

“The domestic steel industry is under pressure to cut production, while demand from downstream steel-consuming industries is likely to weaken too,” the association pointed out in the report.

China has entered the traditional off season for steel consumption in summer when road freight and work on building sites outdoors and are hampered by heavy rainfalls and high temperatures.

In the medium term, steel demand is unlikely to grow at a fast pace given the cooling of the real estate sector, the shortage of automotive-use semiconductors and the coming low season for home appliance production.

CISA’s data showed that stocks of the five major steel products comprising rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate in warehouses in China’s 20 major cities have been mounting continuously since the start of June and as of July 10 had reached 11.7 million tonnes. The total was higher by a huge 4.4 million tonnes or 59.7% from the beginning of this year, indicating the great pressure to destock.

However, domestic steel prices are unlikely to fall sharply amid intensified market expectations for a steeper reduction in supply over the remainder of 2021, CISA said, referring to Beijing’s target to lower steel output this year.

Last month, daily crude steel production moved down on month for the second month, dipping by another 2.5% from May to average 3.12 million tonnes/day, CISA said quoting data from the country’s National Bureau of Statistics (NBS). Nonetheless, output remained at a very high level, it noted.

Domestic steel mills also face more pressure in controlling their production costs as prices of imported iron ore have been hovering high. As of July 16, CISA’s China Iron Ore Price Index (CIOPI) assessed the imported iron ore price at $219.63/dmt CFR China, posting dramatic growth of 109% on year, and much higher than the on-year growth of 44.4% in steel prices.

At the same time, CISA warned that China’s steel exports may face great challenges with the recovery in steel supply overseas and though the impact of China’s decision to cancel the tax rebates on some steel exports starting from May 1, the association warned.

Data from the World Steel Association (WSA) quoted by CISA showed that the world’s total crude steel output outside China had surged by 32.9% on year in May, easing the supply tightness in the global steel market.

Written by Nancy Zheng, zhengmm@mysteel.com

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.