WEEKLY: Tangshan billet hits 82-mth high as curbs bite
The price of carbon steel billet in North China’s Tangshan city jumped
to an 82-month high on August 17 as the onerous output restrictions being
imposed on steelmakers to reduce smog levels over the city have tightened
supplies of the semis, market sources explained.
The price of Q235 billet in Tangshan, a key indicator of construction-steel market sentiment, strengthened for a sixth straight week during August 11-17, up by another Yuan 130/tonne ($18.9/t) on week to reach Yuan 4,040/t EXW including the 16% VAT as of last Friday, according to Mysteel’s database.
Local authorities in Fengnan and Guye districts in Tangshan are requesting that steelmakers in their areas run their blast furnaces at half of their operative capacity until the end of this month, instead of the earlier guideline of 20-40%, to help reduce air pollution.
Consequently, the steelmakers are having to pare down their production, a trend borne out by the results of Mysteel’s regular weekly survey which showed the capacity utilization rate among the surveyed mills in Tangshan dropped another 2.3 percentage points on week to 61.48% as of August 17 – a new low since March 23. Billet supplies in North China have been a casualty.
Altogether, 80 of the 164 blast furnaces located in the Tangshan area have suspended operations for maintenance. These 80 represent some 56,230 cu m of upstream capacity that is now idled, which translated to a loss of actual molten iron output of 1.16 million tonnes over August 11-17. This was larger than the 1.05 million tonnes loss recorded for the week of August 4-10.
The consequent surge in the billet price has seen the margin among the billet producers in Tangshan jumping by Yuan 116/t on week to Yuan 1,101/t including the 16% VAT last Friday. The mills’ production costs climbed during the week but only by Yuan 14/t on week to reach Yuan 2,939/t including the 16% VAT, Mysteel notes.
North China’s re-rollers, however, had been spooked by the substantial and continuing strengthening of prices and thus, last week decided to hold off buying, especially when stocks of finished steel nationwide seemed elevated last week.
Billet inventories at the 28 re-rollers in Tangshan which Mysteel surveys declined by 34,000 tonnes or 17% on week to 168,000 tonnes as of August 17, a new low since September 15 2017.
Indeed, demand for finished steel including rebar and wire rod seems to be softening a little of late. Mysteel’s latest weekly survey showed that inventories of the two items in traders’ warehouses among China’s 35 major cities grew by 39,000 tonnes or 1% on week to 5.7 million tonnes as of August 16.
Written by Thea Feng, fengyx@mysteel.com
Edited by Russ
McCulloch, russ.mcculloch@mysteel.com
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