China steel semis imports stall as price gap broadens

China's imports of semi-finished steel have almost stagnated recently as overseas sellers and domestic buyers are finding it increasingly harder to reach deals, now that the price gaps have yawned wider, say Chinese industry players.

As of March 9, the price of 5SP 150mm square billet imported from Vietnam was $780/tonne CFR East China, up $40/t on week, according to Mysteel's assessment. The Vietnamese billet's contango against the market transaction price in Jiangsu province, East China, had also enlarged to $93.9/t from $65.1/t a week earlier, with the latter's price at $686.1/t excluding the 13% VAT on the same day.

With such a price difference, "there is no chance (of imports) at all," a billet importer based in East China grumbled.

At present, domestic billet importers' bids are only around $660-670/t, the source said.

The price gap has broadened mainly due to recent jumps in overseas billet prices, sources noted. Billet prices internationally are being driven up by supply reductions from Russia, a major exporter of such steel semis to global steel markets.

Sanctions imposed by many governments on Russia for sparking the conflict in Ukraine has meant that Russia has now largely suspended its semis exports due to difficulties in shipping the products and issues in settling dollar-based contracts, they observed.

Prices of billets from other major suppliers such as India and Turkey have increased by a large extent as the previous buyers of Russian semis had turned to them for substitute supplies.

Offers from Turkey, for example, had jumped $65/t on week to $845/t FOB as of March 9, according to Mysteel's assessment.

"Turkey's steel mills are very optimistic about the billet price trend in the near term. Some mills have turned to concentrate on semis exports, while previously the major products the country exported were rebar," a Shanghai-based market watcher observed.

China's central government is encouraging the import of semi-finished steel products as part of efforts to persuade domestic mills to focus on higher value-added steel items, as reported. Subsequently, the country's semis' imports have hovered above 1 million tonnes/month since May 2021, the Customs data show, after the finance ministry removed all tariffs on semis' imports effect May 1.

The level had increased notably from 700,000-900,000 tonnes/month over January-April last year, Mysteel Global noted.

This year, however, as domestic prices have stayed below overseas levels, especially since the jumps in global prices, China's buying of overseas billets has been comparatively limited, according to Mysteel's tracking.

As East China's steel re-rollers largely rely on imports for production, the limited billet availability and low margins have meant that most are only able to produce at very low capacity, as indicated by Mysteel's survey.

The survey across 36 independent steel rolling mills in East China showed that their capacity utilization was only 36.38% as of March 3, reversing down 0.37 percentage points on week.

Written by Olivia Zhang, zhangwd@mysteel.com

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.