Ex-Asia billet offers have increased on July 10, following the recent claims of the Chinese government that they would implement supply reforms in the steel market to cut overcapacity and given expectations for better demand for steel in September and October, also because of anticipated stimuli measures. At the same time, sales of billets in Asia have almost stopped after the recent rise as buyers are assessing the situation and sustainability of the trend.
The ex-China billet reference price has increased by $5/mt from yesterday, July 9, to $430-435/mt FOB today, with most offers at the higher end of the range. Some traders have even voiced $440/mt FOB. But the tradable level is still below $430/mt FOB as the market sources are waiting for new supply reforms to provide some long-term support to the trend.
According to the government announcements since early this month, China will implement another supply reform in the steel industry with one-off shutdowns of non-efficient mills expected. This may provide significant support for the expected 50 million mt drop in steel production rumored as possible in 2025. Earlier this amount of 50 million mt had been assessed as too big and not realistic, with more market sources expecting a reduction not above 20 million mt, but if the reform starts the steel output cuts may be higher. “A military parade will be held in Beijing on September 3. Most factories in northern China have received notices of production restrictions. Meanwhile, there is news that the SCO summit [State Council meeting of the Shanghai Cooperation Organization (SCO)] will be held in mid-to-late September, during which time logistics and shipping at Tianjin Port will be affected. Therefore, it is difficult for prices to fall in the short term,” an Asian source said.
The Indonesian mill has increased its billet offers for October shipment to $440/mt FOB, up by $5/mt from late last week. “This increase is fully based on the Chinese rise. I have not seen deals after they sold at $422-425/mt FOB a long time ago,” an international trader said.
Offers for Asian 3SP billets have been reported at $450/mt CFR to Thailand and Indonesia, while the last deal for this grade was done a week ago to Thailand at $440/mt CFR, and market sources said that with the current offers most buyers have withdrawn. As for 5SP offers, they have been heard at $450-455/mt CFR in the Philippines, though some traders have been ready to negotiate if there is a firm bid for a decent volume at $445/mt CFR. “Prices are increasing, it is obvious, but some traders have positions, so it can be possible to find some discounts today, not sure about tomorrow,” a local trader said. The SteelOrbis reference price for import billet in Southeast Asia has settled at $445-455/mt CFR, increasing by $2.5/mt on average over the past week.
