Following the good start after the long holiday since last Friday, bids for imported billet in China have fallen significantly and most customers have been either voicing low bids or staying out of the market altogether.
The highest tradable level after the holiday at $720-725/mt CFR China has slipped to $695-705/mt CFR now, according to a number of market sources. “Today, futures are very volatile. Basically, bids will certainly be below $700/mt CFR now,” a trading source said.
Rebar futures have shown a second day of sharp declines, closing at RMB 5,421/mt ($839/mt), losing 4.7 percent since the level settled on Tuesday. The local billet price in Tangshan has lost RMB 50/mt ($7.7/mt) today, October 14, coming to RMB 5,250/mt ($812/mt) ex-works, below than seen before the holiday. This new level translates to $719/mt, excluding 13 percent VAT.
Though most overseas suppliers have not been active in cutting offers to China yet, they will have to be more flexible, sources have said. Some of them have started more active negotiations in Southeast Asia instead of in China, voicing offers at $710-715/mt CFR.
The expected easing of production cuts in October and the uncertainty in the rebar market have been behind the recent drop in China. “The domestic market is not good. The Evergrande [collapse] exposed more property companies. So the sentiment is bad,” a China-based source said.
Premier Li Keqiang said that the government will raise energy supply capacity, to stimulate thermal coal imports and support another measure to resolve the power crisis. In addition, he stated that a "one-size-fits-all" program for lowering production of energy-intensive enterprises, including steel mills, will have to be stopped now. This will likely improve the supply of billet in the local market in China, which has also put significant pressure on prices over the past few days. The power shortage, which is the major issue for China at the moment, has also led to the conversion cost from scrap to billet going up.
$1 = RMB 6.4612