Global indicators of operating margins at steel mills remain strong, supporting prices of high grade raw materials and demand for premium grade coking coal, sources said.
Global steel spreads so far in March and February rose further from January, as spreads between steel and feedstocks won support on higher steel pricing.
The focus is on maximizing iron production against steel orders and there is less pushback at high coking coal prices reported so far. Pressure at mills to meet targets and exacting qualities along the chain is keeping up demand for premium grade raw materials, a steel mill buyer said.
He expected higher coking coal prices to persist in the second quarter, with a decline to the high $100s/mt FOB at best from Australian premium coal trades under quarterly contracts at $237/mt.
Coking coal prices are supported by steel mill spreads and steel prices, with coking coal supplies in Australia, Canada and the US prone to weather and mining, logistics problems so far this year.
Another mill buyer said an increase to $58/dry mt for blast furnace pellet premiums in the first quarter of 2018 from around $45/dmt in prior calendar year contracts had become representative for top tier material;, This followed a rise in steel prices during extended negotiations with miners since November.
Steel mill spreads have spiked in some markets and segments, such as for export HRC in China, and scrap-based EAF steel products in the US.
US scrap-based mill spreads surged in February, as steel prices rose ahead of a decision on imposing import tariffs for steel into the country. The US HRC and shredded scrap spread exceeded $500/st on March 9 after tariffs were confirmed at 25% on finished and semi-finished steel.
Steel mill spreads for flat steel in China rose further toward record levels in September 2017 as steel prices moved higher, and underlying iron ore costs and coking coal import costs maintained recent levels.
Iron ore import prices into China strengthened in February to the highest in 11 months, rising to $77.46/dry mt CFR China from $75.86/dmt CFR China in January.
With higher coking coal import prices, raw material costs for reference iron ore and premium coking coal imported into China in February were 2.7% higher than in January and 6.9% higher than a year earlier. This is based on spot prices and quantities used per metric ton of hot metal.
China mill spreads between HRC steel export prices and imports of iron ore with coking coal in February moved up to $325.05/mt, from a month earlier.
The ASEAN HRC spread was up 7.6% to $351.15/mt in February, based on TSI delivered HRC CFR ASEAN port.
The S&P Global Platts China rebar export price-based spread lost 0.38% to $291.32/mt in February as steel prices were not able to compensate for the rise in raw materials.
In the Turkey and Black Sea region, continued increases to rebar prices added strength to margins.
Rebar-scrap margins in Turkey closed up 6.88% to $214.48/mt in February from January.
