FEATURE: China billet price at 3-y low on thin demand
As of February 18, the Tangshan Q235 150mm square billet price was assessed at Yuan 3,000/tonne ($428.6/t), after having persisting at Yuan 3,300/t since January 13, according to Mysteel’s databank. Both prices are in terms of EXW and including 13% VAT.
Most Tangshan re-rollers had already stopped operations up to a half month prior to the start of Chinese New Year (CNY) holiday on January 24, as reported, mainly due to the low profits – and in some cases, losses – they were making on the semis, and they have had to remain shut even after the CNY ended on February 2 because of the ongoing Novel Coronavirus Pneumonia (NCP) epidemic.
As of February 19, all the 35 sampled re-rollers in Tangshan were still closed, and their billet inventories, as a result, increased by another 0.3% on week to reach 534,300 tonnes, according to Mysteel’s weekly study.
In view of the lower prices, some Tangshan BF mills chose to reduce billet output to avoid further losses, according to a local Tangshan source. Given the prevailing billet prices, many small-sized mills have already been losing money as their costs for producing billet have averaged Yuan 2,996/t including 13% VAT recently, according to her.
Mysteel’s latest survey of Tangshan’s steel sector showed that as of February 13, some 48 of the 138 blast furnaces the city’s steelmakers host had been on maintenance, six up from the prior week. In parallel, average capacity utilization among those furnaces in operation had fallen by 6.52 percentage points from February 6 to 72.94% on February 13, nearly three-month low.
China’s static billet market has not only caused anxiety domestically but also renewed the concern about China’s possible billet exports, a Hongkong-based trader shared.
“I have heard market talking about some billet offers emerge from China, as some Chinese mills and traders are trying to find a resolution to relieve stress on the capital flow,” she said.
A market source in Tangshan argued, though, that this may not be much of an option to the local mills or traders.
“Market is still uncertain, and the domestic demand may revive and fast if the construction sites and re-rollers may resume operating in a week or two as expected,” she said, adding that the export and domestic sales prices had been about the same, so the enthusiasm to export should have been rather low.
Besides, “for those steel mills and traders that are not having much tonnage at the ports, it will be a challenge for them to move the cargoes to the ports for exports even if they are thinking of selling abroad,” she added.
Meanwhile, the remaining BF mills in Tangshan are still pursuing normal production as they expect that downstream demand will recover in March. “However, most re-rollers would rather stay closed than re-open their facilities when the finished steel market doesn’t show any obvious recovery,” the Tangshan source argued, adding that billet prices may need a longer time to recover.
The national average benchmark price for HRB 400 20mm dia rebar refreshed its 33-month low again as of February 18, hitting Yuan 3,693/t including 13% VAT, or dipping another Yuan 15/t on day, according to Mysteel’s data.
Besides, billet stocks held by 14 trading houses in Tangshan had swollen to a new 10-month high of 666,900 tonnes by February 13, or up by a huge 28.3% on week – another obstacle to the recovery of billet prices, Mysteel Global noted.
Written by Venus Wang, wangyi@mysteel.com, and Hongmei Li, li.hongmei@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
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