Chinese billets resist decline with strong exports

SteelOrbis Shanghai Chinese semis export has seen a rapid increase since the beginning of April and Vietnam emerged as the second largest billet importer from China in April, while it was not even in the first ten in March. The brisk international demand is expected to keep Chinese billet prices high, despite the recent decline in domestic finished steel prices. From January to May, China's average monthly billet export is 100,000 mt, but exports increased to 480,000 mt only in April and to 680,000 mt in May. In this increase, in addition to strong increase in demand from other countries, Vietnam played an important role. The Government of Vietnam decided to ban scrap steel imports from July 1, 2006 in order to reduce environmental pollution. Therefore, Vietnam's billet imports have increased dramatically in April and May, after the rumors about the decision were spread. Vietnam's billet demand is expected to surpass 4 million mt this year, and the country will have to cover 85 percent of that figure with imports when the scrap import is banned. Meanwhile the demand from South Korea and Taiwan has also picked up obviously. Therefore, Chinese semis prices are unlikely to go down considerably as long as the international demand is brisk. However, in the domestic market, semi finished steel prices dropped in Tangshan last week due to the decrease in finished steel prices, and that in other regions remained stable with less commercial activities. Driven by the large amount of orders from rolling mills, Chinese semi finished steel prices saw rapid increase during the previous weeks. However, the semis inventory of rolling mills have reached a very high level nowadays on one side, and finished steel prices have begun declining in domestic markets, which makes it hard for rolling mills to accept the current semi-finished steel prices. The semis producers in Tangshan said that they had to lower their ex-factory prices continuously because of less inquiries and orders since Monday. Yet, the semis producers and traders in other regions are keeping their prices firm. Currently, Chinese billet offers for export are at around $420-440/mt FOB levels and slab offers have started pushing $470-490/mt FOB levels. Meanwhile, common carbon billet price in Tangshan, Hebei Province is RMB 3,050/mt ($381), and that of 20 MnSi is RMB 3,100/mt ($387). The slab price in Tangshan is RMB 3,250/mt ($406). Although Chinese semi finished steel prices saw minor reduction in domestic market, it is expected to be balanced with the brisk demand and continuously rising prices in the international market.