China’s raw material market March 4-11, 2005

China’s raw material market March 4-11, 2005

Domestic steel makers strengthened their risk consciousness as raw material prices continue to skyrocket. The raw material market this past week experienced basic adjustments. At present, the raw material price tendencies will greatly depend on the steel market trend since the current average raw material cost has approached the highest level that steel makers can afford. In detail, pig iron prices rose sharply, and special ferroalloys exhibited a steady increase. On the other hand, scrap, iron ore and coke prices have all remained stable. 1. Pig iron: China’s pig iron market retained its strong trend this week, driven by sharply increasing prices for iron ore and steel products. (1) North China The market price of steelmaking pig iron in Shanxi reached 2500 Yuan/t, 150Yuan/t higher week-on-week with tight supply. In Hebei, the procurement price remained 2600-2650 Yuan/t, and quite a few steel makers intend to raise their quotation. (2) Northeast China The Northeastern market has been a litter stronger, with the steelmaking pig iron price in Liaoning and Heilongjiang reaching 2600 Yuan/t, up 50-100 Yuan/t. Local steel makers have gradually raised their procurement strength. (3) Southwest China The Southwestern market saw dramatic jumps. The steelmaking pig iron wagon price in Yunnan climbed 200 Yuan/t to 2400 Yuan/t due to continuously tight resources. (4) East China The steelmaking pig iron ex-factory price in Shandong and Anhui reached 2650 Yuan/t. Steel makers continue to feel big pressure on procurement. Some steel makers tossed around the idea of raising procurement prices to 2720-2750 Yuan/t. Domestic pig iron resources tend to be tight because of the increasing cost of production and booming exports. On the other hand, most steel makers remain quite cautious in procurement because of the great pig iron price increase. Thus it is forecast that the recent pig iron price increase will gradually slow. 2. Scrap: The HMS procurement price in Eastern China was 2600-2650 Yuan/t last week. Some steel makers in Jiangsu and Shandong dropped procurement prices by 20-30 Yuan/t due to a smoother delivery situation. In Middle-South China, HMS procurement prices in Hubei, Hunan and Henan hovered at 2450-2500 Yuan/ton. Guangdong saw prices closer to 2350-2400 Yuan/t due to rich inventories. In Northern China, scrap supply remains tight. The HMS procurement price in Northeast China reached 2450-2500 Yuan/t, while medium scrap in Hebei rose to 2350-2400 Yuan/t. Some steel makers are considering reducing procurement prices with gradually increasing consignment. Many small electric furnace steel makers in Eastern China rushed for scrap at high prices due to the sharp price increase in construction steel this past week. This resulted in tighter scrap supply. Meanwhile, scrap imported from the US and Japan rose 10-15 US$/t recently 3. Ferroalloy: Molybdenum concentrate prices rose to 6000 Yuan/mtu this past week, influenced by the production halt in Northeast mining enterprises. As a result, ferromolybdenum prices increased further. The current procurement price for some steel makers is 410’000 Yuan/t. Resulting from a deficiency of upper-reach resources and a sudden supply reduction in the world market, the ferrovanadium market continued its upward trend this past week. Ferrovanadium saw a 40’000 Yuan/t increase to finish the week at 330’000 Yuan/t. Meanwhile, ferrotungsten price continues to climb as market supply remains tight. Prices last week were 135’000-140’000 Yuan/t. Among general ferroalloys, the ferrosilicon market remains stable. The price of Northwest China-origin ferrosilicon (72#) stayed at 5’000 Yuan/t, while the export quotation of 75# ferrosilicon remained 640-660 US$/t (FOB). The ferromanganese market remains stagnant. The ex-factory price of Southwest China-origin silicomanganese (Mn65Si17) stayed at 6’300-6’400 Yuan/t, while that of high carbon ferromanganese (65#) as well as medium carbon ferromanganese (Mn78c2.0) was 6’300 Yuan/t and 11’400 Yuan/t respectively. Ferrochromium prices inched upwards. The price of high carbon ferrochromium rose 100-200 Yuan/t to 7’000 Yuan/base ton, while low carbon ferrochromium prices were 11’000 Yuan/base ton. 4. Coke: China’s coke market experienced a stable week. 2nd grade met coke ex-factory price of Shanxi origin maintained 850-900 Yuan/t (wagon price 1080-1120 Yuan/t) levels. 1st grade met coke retained its 1000-1050 Yuan/t (wagon price 1150 Yuan/t) level. Railway enhancements smoothed the consignment situation of Shanxi coking enterprises, thus allowing them to offer slightly reduced delivery charges. Steel makers in Northern and Northeastern China report a 2nd grade met coke procurement price of 1150-1200 Yuan/t. 1st grade met coke prices remained 1300 Yuan/t. Regarding exports, China 1st grade met coke (ash<12.5%) prices stayed at 240 US$/t (FOB), as suppliers and customers have both taken wait-and-see attitudes. 5. Iron ore: China’s iron ore market maintained a relatively stable position last week. The iron ore procurement price in Hebei Tangshan dropped 10-20 Yuan/t to 880-920 Yuan/t. However, the procurement price for some small steel makers remains at 950-960 Yuan/t. In Hanxing, the procurement price for iron ore was 930-950 Yuan/t, but no transactions took place last week. Local tight supply will be alleviated because more and more mining enterprises will go back to work in the near future. Steel makers in Northeastern China still executed iron ore procurement transactions at 700 Yuan/t last week. Slight price reductions in surrounding areas may put pressure on the steel makers, however. In Shanxi, the iron ore price increased 60-90 Yuan/t to 750 Yuan/t for local fines and 910-940 Yuan/t for steel makers’ procurement. At the same time, iron ore import prices have been stable. The price for Indian fines (63.5%) reached 840-870 Yuan/t, while the Brazilian fines (65%) price reached 920-950 Yuan/t. 6. Sea freight: Recent global sea freight prices became stable after slight declines. Through Thursday (March 10th), international sea freight from Brazil to China was 34.655 US$/t, decreasing 0.02 US$/t. Western Australia to China rates were 17.644 US$/t, down 0.594 US$/t.