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Analysis: Steel mill spreads in China, US hit records in May

  • Wednesday, June 13, 2018
  • Source:ferro-alloys.com

  • Keywords:Steel mill, China, U.S
[Fellow]Analysis: Steel mill spreads in China, US hit records in May

[ferro-alloys.com]Global indicators of operating margins at steel mills remain buoyant as viewed in China, Asia and US markets, with steel product pricing outpacing iron ore, ferrous scrap and met coal costs.

Steel to raw materials spreads in China and the US continued to rise in May, after increases over the past three months. New record highs were seen, as spreads surpassed a peak last year in indicative margins.

With new records set monthly, and driven by steel prices rather than any big changes in steel raw materials costs, indicative margins may be approaching their limit.

A survey by S&P Global Platts showed Chinese steel market sentiment weakened further in June. In China, market participants are reported to be extremely uncertain about steel price direction.

Higher steel prices and margins may support raw materials prices, adding to margins for miners, scrap recyclers, and steel producers with higher costs for end-users in the auto, energy and infrastructure sectors.

High quality iron ore premiums and premium coking coal prices have ticked up, on a drive for higher steel mill utilization and efficiency, aiding pollution cuts.

Steel mill spreads are widest in segments such as HRC steel in China, based on export prices, and scrap-based EAF mill flat steel products in the US.

Underlying iron ore costs and coking coal import costs were little changed in May, compared with April.

Iron ore import prices into China settled at $65.95/dry mt CFR China in May, from $65.27/dmt in April, and were off compared to February's 11-month high of $77.46/dmt CFR China.

With stable coking coal import prices last month, raw material costs for reference iron ore and premium coking coal imported into China in May were marginally higher than in April, and 11.4% higher than a year earlier. This is based on spot prices and quantities used per metric ton of hot metal.

CHINA HIGH

Chinese mill spreads between HRC steel export prices and imports of iron ore with coking coal in May moved up to $365.28/mt, up 2.2% on April. As of Tuesday, the spread was at $363.88/mt FOB, with levels coming off a peak at $371.80/mt on May 28.

The ASEAN HRC spread rose to $386.72/mt in May, based on TSI delivered HRC CFR ASEAN port, up 1.5% on April.

US scrap-based mill spreads rose in May, with steel prices supported by import tariffs. Steel pricing outpaced increases for benchmark Midwest shredded scrap prices.

The US HRC and shredded scrap spread hit $553.33/st ex-works Midwest average over May, up 2.1% on April, and compared with Q1's $436/st average.

  • [Editor:王可]

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