Chinese semis prices move steadily up after the holiday

SteelOrbis Shanghai Driven by the rising finished steel prices, China's billet prices increased slightly after the New Year holiday (the extent of the rise being limited by the weak export situation). Meanwhile, slab prices remained at the same level. On January 10, the price of common carbon billet in Tangshan, Hebei Province has risen RMB 40/mt ($5) week on week to RMB 2,780/mt ($356), while that of 20MnSi was up RMB 20/mt ($3) to RMB 2,820/mt ($362). As regards slab, the ex-factory price from Laiwu Steel has remained constant at RMB 2,850/mt ($365). After the New Year holiday, China's long products prices saw an overall soar across the various regions. Therefore, rolling mills accelerated their production and increased their purchases of semis. Market insiders point out that semi finished steel is now seeing short supply and brisk demand in the domestic market. Furthermore, buyers in Southeast Asia feel it hard to accept such high price levels, with the result that Chinese semis producers have not recently been active in quoting for export. The rolling mills of South Korea and other Asian countries are now in a dilemma. On the one hand, they can't buy in any low-price billet from China, while exports quotations of CIS billet are also on an upward trend. It has been reported that the CFR price of 5PS billet from Russia to Taiwan is around $460-470/mt, much higher than that of Chinese billet. On the other hand, due to the eight percent export rebate, the export quotations of China's long products are merely $5/mt higher than those for billet. Thereby these Asian rolling mills can only maintain production by falling back on their inventories. However, when they run out of inventory, most probably they will have to continue importing billet from China. The latest figures released by the China Iron and Steel Association (CISA) show a sharp decrease in China's semis exports in December compared with November - a result of the new export tariff on semi finished products. Nevertheless, this is just a temporary impact. With the rising finished steel prices in the international market and the decreasing semis inventory, the mills in Southeast Asia will have no choice but to import Chinese semis. While semis exports are expected to go up in the short term, exports for 2007 will be lower than the levels of 2006. China's exports of semi finished steel totaled 500,000 mt in December, down 6.3 percent or 30,000 mt year on year and down a huge 980,000 mt month on month. Meanwhile, China's December imports reached 17,000 mt, down 77.3 percent or 58,000 mt year on year and down 4,000 mt month on month, resulting in net exports of 480,000 mt. China's total semis exports for 2006 amounted to 9.04 million mt, up 27.9 percent or 1.97 million mt. Total imports for the year reached 370,000 mt, down 71.8 percent or 940,000 mt, giving net exports for 2006 of 8.67 million mt.