Futures prices for all major steel products including rebar and HRC in China have posted another sharp drop on Monday, May 17, after the plunge in prices last Friday. Freshly released production figures have shown a further increase in crude steel output in China in April, raising oversupply worries for the future. Moreover, the government’s call made last Friday to curb speculative market price rises is affecting the trend in China.
The import billet market in China, which was the main driver in the global market last week, has lost ground. Last week, before prices started to retreat, the price level for ex-ASEAN billet reached $790/mt CFR and other suppliers were also in negotiations at this level. The expectations were that prices would hit and exceed $800/mt CFR, but this has not happened. As regards contracts, since Thursday bids have become rare and they have been falling continuously.
On May 17, steel mills in Tangshan have announced billet prices at RMB 5,540/mt ($861/mt) ex-works, down by RMB 130/mt ($20/mt) from the level on Friday. If excluding 13 percent VAT, this price corresponds to $762/mt. As SteelOrbis announced previously, on Friday local prices in Tangshan lost RMB 150/mt ($23/mt).
Such a sharp fall (by $43/mt in total) locally has halted import billet activity. One of the large international traders said that he does not see the tradable import price at above $740/mt CFR. Moreover, some rare bids have been heard at $730/mt CFR from China. “No one will buy and sell in the current market,” a source said. According to market participants, prices in the Chinese market need to stabilize before customers will resume billet imports.
Most major billet suppliers have been evaluating the situation and not voicing firm offers. Some traders have been asking for $760/mt CFR. Offers for IF billet have been heard at $745/mt CFR on Monday, down by at least $10/mt compared to Thursday. “We don’t have many volumes left for sales, so we are not in a hurry to cut prices. It is better to watch further developments in China,” a producer said.
On May 17, rebar futures at Shanghai Futures Exchange closed at RMB 5,596/mt ($870.3/mt), down by RMB 165/mt ($26/mt) or 2.86 percent compared to Friday, May 14. This has reflected the worsening sentiment in the market.
In April, China’s crude steel and finished steel outputs amounted to 97.85 million mt and 121.28 million mt, surging by 13.4 percent and 12.5 percent year on year, even despite the tight restrictions in Tangshan during the month. As prices for construction steel were on the rise and profits were going up steadily, crude steel output in China increased by 4.07 percent in April compared to March.