Major Asian billet exporters have increased their offers by significant margins for the international market, following sharp futures rises in China, reflecting better sentiments after the announcement of the strict control of increases in steel capacity and calls to curb excessive competition.
The ex-China billet reference price stands at $440-450/mt FOB, up by $10/mt on average from late last week. “Apart from real demand remaining sluggish, the macro news is all bullish. A thaw in China-US relations and a domestic pushback against cut-throat competition in China are the major supportive drivers today,” a Chinese selling source said.
Though there are still no concrete steel production cut targets set by the authorities and the recent announcements are mainly for the future market development, the real supply volumes are expected to be lower in July and August. “End-of-August production cuts are expected around Tangshan and in other parts of North China for the big political meeting in Beijing on September 3. From August 23 onwards, production may stop, especially sintering,” a Singapore-based trader said. Another major Asian trader said that he expects production to be strong again from September, and in total steel exports from China may exceed last year’s 110 million mt. “That is why buyers stopped to check prices. There is no need to buy billets in the rising market,” he said.
A third trader commented that the recent high exports were connected also with more active non-VAT sales.
The leading Indonesian mill has increased billet offers to $447/mt FOB for October shipment today, July 21, increasing them by $7/mt from Friday. Slab offers and shipments are similar. Wire rod offers from the mill are up by $5/mt to $490/mt FOB.
In the near future, billet prices are likely to remain high in China and the ASEAN region, especially considering raw material price hikes.