The Chinese billet market has shown another day of sharp price increases on Monday, May 10, with import prices $50/mt higher than last Friday, following local price rises. Surging futures prices have become the main driver and prices may reach $800/mt CFR soon, market sources have told SteelOrbis.
Higher import prices accepted by buyers
A deal for 30,000 mt of ex-Malaysia 3SP billet has been done at $735/mt FOB or up to $770/mt CFR China for June shipment on Monday afternoon. A supplier from Indonesia was in negotiations at $750/mt CFR in the morning and, though some traders said that the deal was done, a number of market players have doubts about this as new offers have been reported at $780/mt CFR minimum from Indonesia. “Tomorrow’s price may be around $800-820/mt CFR,” a Chinese source said. One offer has already been voiced at $800/mt CFR today. A number of firm bids for import billet from China are at $760-765/mt CFR as the market has been finishing its work.
The SteelOrbis reference price for import billet price in China has been settled at $760-770/mt CFR, up by $50/mt from last Friday’s level of $715/mt CFR on average.
Rising futures or strong rebar demand: which is the main driver?
Steel mills in Tangshan have increased their billet prices by RMB 150/mt ($23/mt) today, Monday, and by RMB 460/mt ($71/mt) in total over the weekend from May 7, to RMB 5,650/mt ($877/mt) ex-works. Excluding 13 percent VAT, this price level corresponds to $776/mt. Moreover, ex-warehouse prices in Tangshan have reached RMB 5,770/mt ($896/mt), according to sources.
The main season for such a sharp billet price increase on May 10 in China was “the futures rise, absolutely. The market is purely sentiment-driven,” an Asian trader said. Most market participants agree with this view, saying that the overall strong rebar market in China has been providing big support for billet prices, but such sharp hikes seen recently are more because of market sentiments, rather than because of fundamentals.
On May 10, rebar futures were closed at RMB 6,012/mt ($933/mt) at Shanghai Futures Exchange, up RMB 340/mt ($52.8/mt) or by 5.99 percent compared to May 7. The limit for the daily futures price increase is six percent, which shows very strong sentiment.
On the other hand, the overall supply-demand situation in the Chinese rebar market is characterized as healthy. But it will be hard to absorb such rapid price increases and the market will need to find some equilibrium in the coming weeks. “The market may be stuck. It [such a price rise] is not sustainable,” a trading source said.
What are the expectations?
Most market participants polled by SteelOrbis believe that the Chinese billet market will remain strong in the coming week, mainly owing to persisting demand. “The Chinese market will remain a leading import market [in the global arena],” a large trader said. “Now we see many more inquiries than offers in China,” another source said.
Nevertheless, the sustainability of the uptrend is questionable after such a rapid daily hike as today, according to a number of market sources. Prices may increase more, most of them believe, but, after reaching the $800/mt CFR mark, “it is hard to imagine what the market will be like,” a Singapore-based trader said.
One source shared its view, saying that the quick rise seen today is bad as the market needs to absorb it and credit lines will be limited at current price levels.
$1 = RMB 6.4425