The sharp rebounds in futures and raw material prices in China have raised expectations of a possible rebound in import billet prices in Asia too. For now, some traders have already increased their asking prices for billets, but customers have not accepted the rises so far, still wondering if the uptrend in China is sustainable. More time is needed for the market to answer this question. At the moment, most market participants assess this as a temporary improvement rather than the start of a change in fundamentals, which are still weak, SteelOrbis learned from the market on June 1.
The SteelOrbis reference price for imported 5SP billet in SE Asia has settled at $505-515/mt CFR, up slightly by $5/mt over the past week. “I would say that the current tradable level for 5SP billets is generally at $505/mt CFR Manila. Although some suppliers have suggested that the offer price has strengthened to $510-515/mt CFR today,” a Manila-based re-roller said. “Offers have gone up, but the increase in prices won't work now. Buyers are looking for really low prices,” a local trader said, adding that in the near future bids for 3SP will still be at $490/mt CFR, while bids for 5SP will be at $500/mt CFR.
The main reason for the recent attempt of traders to increase prices in Southeast Asia’s import market has been today’s developments in China. “The local market in China has picked up, based on local sales increases from stockists. For Southeast Asian billets, I am sure some time is needed to adapt to those upticks, provided it stays like that,” an international trader said. As of Thursday, June 1, rebar futures at the Shanghai Futures Exchange have added RMB 114/mt ($36.2/mt) or 3.32 percent over the past week and 2.84 percent from the previous day to RMB 3,546/mt ($500/mt). Average rebar spot prices in China have increased to RMB 3,643/mt ex-warehouse, up RMB 33/mt ($5/mt) from the previous day, according to SteelOrbis’ data, meaning that spot prices have been on the rise, but much more gradually than futures prices.
As for a demand rise in Southeast Asia, there have been no firm signs of it, at least for now. Only a few deals for ex-China 3SP 150 mm billet have been confirmed to Thailand at $495/mt CFR, which is slightly above the discussed levels of $485-495/mt CFR last week, “but since then they [buyers] have to cough up more dollars, so now they are waiting again,” a Hong Kong-based trader said. “Early this week, traders were trying to induce firm bids at $490/mt CIF for open origins. But it is not clear if this price is available now,” a Bangkok-based source said. Another market source reported that $490-495/mt CFR could be the bottom price for Thai customers in the near future. At the same time, offers for ex-Iran billet have been reported at $510/mt CFR Thailand.
One of the reasons pushing local steel and futures prices up in China has been the higher-than-expected Caixin PMI. The Caixin PMI was published at 50.9 for May today, higher than last month’s 49.5 and expectations of 50.3 for May. This increase in the PMI by private survey points to an increase in manufacturing production in May and an overall improvement in the market, though the official state manufacturing PMI dropped to a five-month low of 48.8, down from 49.2 in April, as announced on May 31.
“China reports lower domestic stocks, but mills’ production rates are up year on year and I don’t understand where steel is going… Fundamentally, it looks like there is too much steel in the world,” a European trader said.
$1 = RMB 7.0965