Local billet prices in China have been indicating a gradual recovery over the past week, and the market mood has also been supported by the recent announcement of the People’s Bank of China that it will cut the required reserve ratio (RRR) for financial institutions by 0.5 percentage points on December 15, aiming to support the development of the real economy and steadily bring down overall financing costs.
Local mills in Tangshan have increased prices by RMB 20/mt ($3/mt) today, December 7, up by RMB 70/mt ($11/mt) from last week, to RMB 4,360/mt ($684/mt) ex-works, translating to $605/mt, excluding 13 percent VAT. These gradual increases have been coming together with rises in local rebar prices even despite the overall lack of an optimistic outlook for long steel demand in December. China’s RRR cut has buoyed up sentiment in the rebar market and a further gradual price increase is possible, market sources believe.
The average ex-warehouse price level for billet in China has been at RMB 4,448/mt ($698/mt), according to SteelOrbis’ data, up RMB 65/mt ($10/mt) over the past week. Among the highest prices was the level in Jiangsu at RMB 4,550/mt ex-warehouse or $632/mt, excluding 13 percent VAT.
Local billet price gains have not been enough to stimulate imports, but the overall tradable level in China has improved to $600-620/mt CFR versus $600/mt CFR on average last week. Most Southeast Asian suppliers have been offering at $660-665/mt CFR, and so the gap has remained too big. A possible option for Chinese buyers could be ex-Iran billets, for which prices have been more attractive. According to sources, the latest deal by one of the Iranian mills was done at $560/mt FOB.
In addition, the tradable level in Southeast Asia (excluding ex-Iran billet) has remained at $640-650/mt CFR, and so suppliers have not been interested in sales to China at much lower levels. Around 20,000-30,000 mt of ex-CIS billet have been sold in this range to Southeast Asia recently.
$1 = RMB 6.3738