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Indicative steel margins in China, Turkey fall further in October

Indicators of operating margins at steel mills in China and Turkey, which plunged in September, have fallen further this month on weaker steel prices and firmer met coal and iron ore raw material costs, according to S&P Global Platts analysis Friday.

Higher imported premium coking coal prices ate into margins as Chinese HRC and rebar steel export prices weakened further this month.
The market continued to see a correction from a peak in June for flat steel export spreads and after rebar’s peak in July.

Iron ore import prices into China settled at $68.73/dry mt CFR China in September, up from $67.16/dmt CFR in August, while high grade iron ore product premiums remained high.

Premium Low Vol CFR China prices rose to $207.96/mt in September, from $188.52/mt in August, and have climbed further in October.

Raw material costs for iron ore and premium coking coal imported into China in September were 6.4% above August’s and relatively stable from a year earlier. That was based on spot prices and quantities of raw materials used per metric ton of hot metal.

Steel prices in China remain high enough top to provide indicative mill margins well above the average for 2017 and also for 2016.

Chinese mill spreads between HRC steel export prices and imports of iron ore with coking coal on Thursday moved below $300/mt for the first time since August 2017.

In September, HRC export spreads fell to an average $336.30/mt, from August’s $353.76/mt. The daily peak remains at $371.80/mt on May 28.

The ASEAN HRC spread, based on TSI delivered HRC CFR ASEAN port, fell to a low of $316.52/mt on Thursday. The spread had averaged $352.45/mt in September, 6.45% lower than August.

The S&P Global Platts China rebar export price-based spread fell to $303.41/mt in September, down 7.6% from August.

In the US, stronger rebar diverging with weakening HRC steel prices led to mixed moves for EAF mill spreads, which use ferrous scrap prices.

Rebar scrap spreads rose 3.6% to $401.52/st ex-works Southeast in September, compared with August.

US scrap-based HRC mill spreads fell further in September on softer spot HRC prices, as a correction from the increase in spreads over earlier months continued.

The US HRC and shredded scrap spread fell 3.8% to $562.43/st ex-works Midwest in September.

The Turkey export rebar melt margin fell 9.65% to $188.83/mt in September, as scrap strengthened and rebar weakened. The Turkey export rebar-import scrap spread hit a new low of $169/mt on Thursday, the weakest since August 2017.

Re-roller margins in Turkey using Platts Black Sea billet and rebar export prices, with indicative shipment costs into Turkey, fell due to stronger relative billet prices.

Export rebar subtracting Black Sea billet landed in Turkey averaged $20.53/mt in September, down from $22.86/mt in August. On Thursday, the spread was at $25.50/mt, down from $30.50 on Wednesday amid lower Black Sea billet pricing than in September.

Source: Platts

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