China: Domestic billet prices to remain under pressure in early-Aug

Billet prices in Tangshan in North China's Hebei province found some upward momentum in July thanks to a combination of factors but this month, they are likely to fluctuate, Mysteel predicts in its latest monthly report.

Over July 3-31, Mysteel assessed the average price of Q235 billet in Tangshan at Yuan 3,577/tonne ($497.7/t) EXW and including the 13% VAT, higher by Yuan 67/t or 1.9% from the average during June 1-30, with the rise reflecting the influence of firmer finished steel and raw materials prices.

As of July 31, China's national price of HRB400E 20mm dia rebar under Mysteel's assessment was at Yuan 3,886/t including the 13% VAT, up by Yuan 31/t or 0.8% from June 30. Meanwhile, by July 28, some Chinese steelmakers had agreed to pay more for their metallurgical coke, representing the third increase they had conceded since June 20 and which brought the total increment to Yuan 200-230/t, as Mysteel Global reported.

During the early part of last month when finished steel prices were relatively soft, steelmakers switched to making billets - which were marginally more profitable - and this resulted an on-month increase in billet output for the full month, the report noted.

Over June 30-July 28, daily billet production among the 30 steelmakers in Tangshan under Mysteel's tracking averaged 46,100 t/d, higher by 1.7% from the previous month.

As for demand, the enthusiasm of local re-rollers for producing was strong, especially in the first half of July when the production curbs imposed earlier by Tangshan city authorities to safeguard air quality were lifted.

According to the report, daily billet consumption among the 55 re-rollers under Mysteel's tracking to rose to 52,425 tonnes/day over June 29-July 26, gaining 3.2% on month.

However, in late July, the Tangshan government reimposed production restrictions on steelmakers and re-rollers as part of air quality improvement measures, leading many mills to idle their furnaces to conduct maintenance, the report added.

Over July 21-27, capacity utilization among the 89 blast furnaces under Mysteel's survey averaged 82.23%, lower by a large 7.2 percentage points from that over July 14-20.

The surprise reintroduction of the production restrictions on their re-rolling customers in late July found retailers nursing larger stocks of semis, with total billet inventories across the four commercial warehouses and two ports under Mysteel's monitoring mounting to 714,900 tonnes as of July 27, higher by 9.7% from June 30.

Looking ahead, billet prices in August may come under pressure, chiefly due to the recovery of supply, with steelmakers now resuming operations after Tangshan's production curbs were lifted, the report suggested.

But market conditions may change to the advantage of the mills in the second half of August, the report observed, pointing out that demand for the semis could well increase if the heatwaves and heavy rains presently disrupting construction and manufacturing activities countrywide gradually ease.

Moreover, within the coming few weeks, the central government may flesh out policies already announced to lift the country's flagging economy which would give a boost to domestic steel market sentiment, the report explained.

Written by Carly Chen, chenziyi@mysteel.com

Edited by Zhenqi Yang, yangzhenqi@mysteel.com

Note: This article has been written in accordance with an article exchange agreement between Mysteel Global and SteelMint.