China’s power shortage pushes up longs prices, opens window for imports

Monday, 11 October 2021 17:47:27 (GMT+3)   |   Shanghai
       

Average Chinese domestic rebar and wire rod prices have surged by over $40/mt since late September amid rising rebar futures prices and prevailing positive sentiments among market players due to the limited supply in the market because of power shortages. This has opened a window for imports of longs to China, market sources believe, and negotiations are ongoing.

During the given period, the average rebar price in China has gained RMB 240/mt, while the average wire rod price has increased by RMB 280/mt since September 30.

China in negotiations for wire rod imports with regional Asian sellers

The supply curbs in the Chinese market have been opening a window for imports, especially in the wire rod segment. China has been importing wire rods occasionally this year when prices were competitive. On Friday, Vietnamese suppliers were in negotiations for IF wire rod at $770/mt CFR in China, up by $10-20/mt compared to the level for Southeast Asia since late September. Chinese importers were asking for $750/mt CFR, but higher prices could be acceptable this week.

Suppliers from Indonesia and Malaysia were offering at $770-780/mt CFR to Southeast Asia early last week, but no new prices have been announced for now and prices will definitely increase, market sources said. Vietnamese producer Formosa Ha Tinh has rolled over its local wire rod prices at $791/mt CFR for December shipment.

Rebar imports also possible, but would be more exceptional

In the rebar market, imports to China would be more extraordinary, but a number of sources believe that in the current energy crisis conditions this is possible. Turkish rebar suppliers have been considering the tradable level for the large volume to China at $810-820/mt CFR actual weight basis. This level translates up to $690-700/mt FOB after the recent increase seen in the Turkish market, following the hike in scrap prices to almost $460/mt CFR.

China does not buy rebar usually, but this is just logical when supply drops while demand is going up,” a market source said.

Since there is reduced interest in import rebar in the traditional sales destinations in Asia, in Singapore and Hong Kong, market sources believe Turkish and Indian producers will manage to sell some tonnages to China. Market sources have reported about the start of negotiations with Chinese traders.

Local background and expectations

Local rebar and wire rod prices in China have indicated big rises amid continuing production cuts and power restrictions. Even in Tangshan, where re-rolling operations of long steel producers have increased to some extent after the holiday, the situation has remained challenging. Sources said that restrictions will continue and are unlikely to be eased significantly this month, SteelOrbis has learned. The supply shortage has bolstered market players’ sentiments. Demand for rebar and wire rod has already started to improve this week following the long holiday.

It is thought that rebar and wire rod prices in the Chinese domestic market will likely edge up in the coming week. On October 11, rebar futures contract (2105) offers closed at RMB 5,808/mt ($900.5/mt) at Shanghai Futures Exchange, up RMB 244/mt ($37.8/mt) or by 4.4 percent compared to September 27, signaling market players’ bullish sentiments as regards the future prospects for the rebar market.

Average domestic rebar and wire rod prices in China's main markets are presented in the tables below.  

Rebar prices in local markets

Spec. (mm) - Category

City

Price (RMB/mt)

Price 
($/mt)

Weekly change 
(RMB/mt)

Weekly change 
($/mt)

25 - HRB400

Beijing

5,790

898.0

240

40.1

Guangzhou

6,370

987.9

300

49.7

Shanghai

6,020

933.6

180

31.0

Average price

6,060.0

939.8

240

40.3

All prices include 13 percent VAT and all prices are ex-warehouse.

Wire rod prices in local markets

Spec. (mm) - Category

City

Price

(RMB/mt)

Price ($/mt)

Weekly

change (RMB/mt)

Weekly change 
($/mt)

6.5 - HPB300

Beijing

6,620

1026.7

160

28.2

Guangzhou

6,620

1026.7

300

49.9

Shanghai

6,490

1006.5

380

62.2

Average price

6,576.7

1020.0

280

46.7

8 - HPB300

Beijing

6,400

992.6

160

28.1

Guangzhou

6,560

1017.4

300

49.8

Shanghai

6,430

997.2

380

62.1

Average price

6,463.3

1002.4

280

46.7

All prices include 13 percent VAT and all prices are ex-warehouse.

$1 = RMB 6.4479


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