Sharp decline in Chinese slab prices

SteelOrbis Shanghai Due to the bearish commercial activity, Chinese slab prices saw sharp decrease over the past week, with billet prices steadily up. By the end of the August 2, the common carbon billet price in Tangshan, Hebei Province was up RMB 30/mt ($4) to RMB 2,770/mt ($348), that of 20MnSi remained constant at RMB 2,800/mt ($351). The slab price in Tangshan is RMB 3,100/mt ($389), and the ex-factory price of slab from Laiwu Steel is sharply down RMB 350/mt ($44) to RMB 2,900/mt ($364). Due to the continuous sharp decline in hot rolled coil and medium plate prices in earlier times, the rolling mills are inactive in purchasing slab, thus leading to the extremely sluggish commercial activity. Some semis producers in Tangshan have not got any domestic order for nearly half a month, only living on the export orders. Right now, the FOB price of slab from stainless steel mills in Tangshan is RMB 3,750/mt ($ 471). The steel mills in that region have taken the initiative in reducing production. Limited by the production planning and scheduling, some large steel mills, like Shandong based Laiwu Steel and Jinan Steel, can only lower the prices instead of reducing production, leading to the sharp decrease in their ex-factory prices. With the quotation at RMB 2,950/mt ($370) and actual deal price at about RMB 2,900/mt ($ 364), the steel mills are inactive in selling. While the slab prices saw rapid decline, the billet prices went steadily up. From the one side, because of the good sales of narrow strip, the steel mills increased the purchase; from the other, when the section prices saw decrease in earlier times, most of the rolling mills reduced or even stopped production, resulting in small amount of purchase of common carbon billet, which caused the insufficiency in billet inventory. However, once the section prices become stable, the steel mills start to increase the purchase. These two factors are the main reasons that caused the rise in common carbon billet prices throughout the past week. Faced with the finished steel market that is not completely stable, the semis producers are cautious about the future market, thinking that there may not be brisk demand in August. And the stable trend or even slight rebound in some types of products can not boost the whole steel market; therefore, the major task for semis producers is to increase the sales so as to ensure the normal production, rather than seeking the high price. Overall, the current Chinese semis market is weak. The billet price trend is upward, but it is not likely to see sharp increase; after the rapid decline over the past week, there is also no big decrease range for slab price in the future.