Ex-China billet softens despite massive coal mine shutdowns

Prices for ex-China billet have moved down today, May 26, reflecting weak sentiment in the local market amid rapidly easing domestic demand and a drop in futures prices. This happened despite the continued surge in coke and coking coal futures for the second day in a row following the explosion accident in Shanxi Province, which significantly impacted coal mining.

Ex-China billet reference price has settled at $470-475/mt FOB, with the higher end of the range losing $15/mt in a single day. This level is still not very far from the $470-480/mt FOB seen late last week, but market sources agree that sentiment has worsened significantly, and now the $470-475/mt FOB level reflects most offers from both mills and traders, while the tradable level for major buyers is hardly above $460-465/mt FOB under current conditions. “Today the market is down, but the international market is silent, so we are not seeing any bids,” an international trader said.

“Last week offers for 3SP in Taiwan were at $490/mt CFR [around $470/mt FOB]. It was a workable price two weeks ago but not last week, as market sentiment was very poor. Now even $480/mt CFR would be hard,” a Singapore-based source said.

Rebar at the Shanghai Futures Exchange and iron ore at the Dalian Commodity Exchange (DCE) dropped by 2.09 percent and 1.95 percent respectively. However, coking coal and coke at the DCE were up 9.05 percent and 5.04 percent respectively following the already significant jump seen yesterday. Affected by a major gas explosion accident on May 22 at Liushanyu Coal Industry Co. of Shanxi Tongzhou Group, 98 coal mines across Shanxi Province have suspended production, with 25 of them having been completely shut down. This has seriously affected coal supply in China, but the price support for steel products has remained very limited. Market sources agree that weak demand in China and still relatively high steel production have affected steel prices the most. The average aggregate daily crude steel output of CISA members was still above 2 million mt per day in mid-May (2.096 million mt).