Import buying activity in the Chinese billet market has started to revive this week, following news that crude steel production in Hebei will be strictly lowered ahead of the Winter Olympics. Prices have been gradually increasing and consolidating at above $700/mt CFR, though some sources believe that rebar demand in the country is not enough to support any sharp rises in the near future.
A deal for 20,000 mt of ex-Indonesia 3SP billet was signed in China at $700/mt CFR late last week. In addition, a contract for ex-Vietnam BOF billet was done at $703/mt CFR. But after that, a fresh deal for ex-Indonesia billet was closed with a Chinese trader at $710/mt CFR, a number of sources confirmed to SteelOrbis. This means that the tradable level for imported EAF/BOF billet in China increased by $10-15/mt from $690-700/mt CFR in the middle of last week to $705-710/mt CFR now, according to sources.
About 30,000 mt of ex-India billets have been offered by a trader at $700-705/mt CFR recently, but there has been no information that the lot has found a taker in China so far.
Chinese traders have become visibly more active. “I think $705-710/mt CFR is possible today. If someone finds $700-705/mt CFR, most buyers should take it,” an Asian trader said. “Moving to September [shipment], imports are likely to revive. Hoa Phat and Dexin [materials] are definitely preferred, even if they are $5/mt higher,” a Chinese source said.
The main reason behind the recent increase in interest in import billet purchases in China is the expected significant decline in crude steel production in Hebei province in the second half of 2021 and the first quarter of 2022 ahead of the Winter Olympics and Paralympics. According to the government’s plan, Hebei Province will cut 21.71 million mt of crude steel production in 2021, down by almost nine percent from 2020, while more than a half of these cuts will be in Tangshan city, where production will be reduced by 12.37 million mt. Since the H1 production results were strong, the overall drop in output would be more than 15 percent in H2 in Hebei if compared to H1. Moreover, during the first quarter of 2022 additional production restrictions are expected and mills which are in categories B, C and D will be asked to fully stop sintering and to reduce BF capacity utilization to no more than 50 percent.
“The news of Winter Olympics production cuts has really changed the sentiment. But apparently Shagang has cut domestic rebar prices by $30/mt today. So, frankly actual demand is still lagging behind and speculation is driving prices,” an international trader said.
The local billet price in Tangshan has increased by RMB 30/mt ($4.6/mt) today, August 11, to RMB 5,110/mt ($788/mt) ex-works, translating to $697/mt if excluding 13 percent VAT. Despite such a modest increase in the spot market, January rebar futures at Shanghai Futures Exchange have risen by 3.1 percent or RMB 171/mt ($26/mt) to RMB 5,597/mt today.
$1 = RMB 6.4831