Trading in the import billet market in China stopped temporarily on Monday, August 2, as the recent government announcement that China would avoid “campaign-style” carbon reduction efforts raised worries that crude steel production would not be cut in the second half of the year as had been expected. This pushed down futures prices sharply and made the outlook for the billet market unclear.
Steel mills in Tangshan have decreased local billet prices by RMB 50/mt ($8/mt) since Friday to RMB 5,220/mt ($807/mt) ex-works, which corresponds to $714mt, excluding 13 percent VAT.
The highest contact prices for imported billet for at least one 30,000 mt Indian lot, one ex-Middle East cargo with the same volume, and two deals for ex-Indonesia and ex-Vietnam billet reached $720-728/mt CFR last week.
Most suppliers were asking for $730/mt CFR minimum on Friday. But with the recent drop in the local Chinese market, the tradable level for imported billet has been reduced by $5-8/mt to $715-720/mt CFR, according to market players’ assessments. “I have not heard fresh bids [for import billet] as futures dropped today,” a trader said.
Rebar futures at Shanghai Futures Exchange lost almost six percent or RMB 318/mt ($49/mt) on August 2 compared to the previous trading day on July 30, coming to RMB 5,414/mt ($837/mt).
On July 30, the Communist Party’s Politburo called for a coordinated and phased process of reaching carbon neutrality, avoiding “campaign-style” carbon reduction efforts, according to the official Xinhua News Agency. President Xi Jinping stated that the main aim is stability in terms of economic growth and bulk commodities prices as well. Big goals in the short term (which may include the previously discussed target of the government to keep crude steel production in 2021 at the level of 2020) are not expected to be a priority any more. As a result, market participants said that the expected steel production cuts will be canceled and billet supply will not decline as had been expected.