Billet price reductions fail to inspire Chinese mills
The weak prices have been the mainstay of the Chinese market as of late due in part to pressure from finished steelmakers who consume billets as their raw materials and in part to pressure from raw material sellers.
Long and flat finished steelmakers have seen their profit margins squeezed a great deal, but recent price decreases in
iron ore and
scrap mean that the
production costs of
billet makers are now starting to come down. As a result, the finished steelmakers expected that the reduced
production costs would be reflected in lower
billet prices.
Billet makers, some of whom were experiencing cash-flow pressure, responded by slashing their prices prior to the national holiday in
China. Prices were down RMB 40-50/ton ($5-6) on average during the last week of September. However, even the lower prices failed to inspire finished steelmakers to snap up billets, prolonging the downward trend for the time being.
East China
Local Q235
billet prices in Shanghai dropped RMB 50/ton ($6) from the previous Friday to RMB 2'900/ton ($358) on September 30, 2005. The price of 20MnSi
billet also fell RMB 50/ton ($6) to RMB 2'950/ton ($364).
In Jiangsu province, the situation was not any better than Shanghai. Local Q235
billet prices went down RMB 40/ton ($5) to RMB 2'920 ($360), and 20Mnsi
billet prices fell RMB 70/ton ($9) to RMB 2'950/ton ($364).
In Shandong province, local
billet prices are lower because most
billet producers are situated here and products are mostly sent from here to the neighboring provinces. Q235
billet prices in Shandong slid RMB 40/ton ($5) to RMB 2'720 ($335), and 20MnSi prices dropped RMB 50/ton ($6) to RMB 2'780/ton ($343).
The transaction volume in all three of these markets was low since the
billet re-rollers slowed down their purchases. Finished steelmakers have begun thinking twice before making their
billet purchases because of the sagging prices in
China. They also think that
billet prices should fall further due to lower
scrap prices.
North China
Cash-flow pressure caused many northern Chinese steelmakers to reduce their prices. The price of Q235
billet fell RMB 50/ton ($6) to RMB 2.780/ton ($343) in Liaoning and to RMB 2'750 ($339) in Hebei.
South China
A better market situation in southern
China meant that prices did not slip as much compared to the other areas. Some
construction steelmakers in Guangdong province bought more billets as they decided to increase their
production slightly. Local Q235 and 20MnsSi
billet prices fell by 30 RMB/ton ($4) to RMB 2'900/ton ($358) and RMB 2'940/ton ($363) respectively.
Central China
Central
China's Henan province saw the largest price drop. The price of local Q235
billet were down RMB 70/ton ($9) at RMB 2'780/ton ($343), while that of 20MnSi was also down RMB 70/ton ($9) at RMB 2'860/ton ($353). The prices in Hunan province slipped RMB 40/ton ($5). Local Q235
billet prices fell to RMB 2'840/ton ($350) and 20MnSi to RMB 2'880/ton ($355). Transaction volume as a whole was weak.
Currently,
billet makers have no option other than to sell their inventories at low prices in order to pay their debts to raw material sellers. Meanwhile,
billet consumers are not willing to make purchases at current prices, and finished steelmakers prefer to reduce their output due to current market conditions.