China: Tangshan billet price nears two-month low

As of May 13, the price of Q235 150mm square billet in Tangshan in North China's Hebei province, the country's largest steel production hub, had dropped by Yuan 100/tonne ($14.7/t) or 2.1% on week to hit a near two-month low of Yuan 4,660/t EXW including the 13% VAT, according to Mysteel's assessment. The decline was mainly due to the tepid demand and weaker cost support, sources observed.

"The re-rollers reduced their procurement of billet in response to the negative margins they were suffering on sales, and small-sized rolling mills in some areas suspended production because the workers were in quarantine," an analyst based in Tangshan noted.

Billet consumption among the 55 re-rollers in Tangshan tracked by Mysteel averaged 59,100 tonnes/day over May 5-11, down 6,000 t/d on week.

The erratic pandemic caused billet demand to fall short of expectations, and bearish sentiments emerged in the market, softening prices, sources reported.

On the other hand, billet production among the 30 local producers in Tangshan under Mysteel's regular coverage over May 6-12 increased by an average of 3,500 t/d from the previous week to 37,000 t/d. During the same period, the capacity utilization rate of the city's 126 local blast furnaces Mysteel tracks gained 1.74 percentage points on week and reached 74.34%.

Market watchers observed that billet producers were also willing to compromise on prices as raw material prices had declined. According to Mysteel's survey across ten integrated steel mills in Tangshan, their costs averaged Yuan 4,721/t including the 13% VAT as of May 13, a decrease of Yuan 105/t on week. Though they were still losing money when selling the semis, their average loss shrank from the previous week to Yuan 61/t, Mysteel Global notes.

Meanwhile, the billet producers aimed to reduce the inventories of finished product at their yards, a market analyst based in Tangshan said. "Logistics around them in Tangshan had basically recovered, and as most producers had high stocks of products, they felt the pressure to ship goods, more-or-less," she added.

As the producers increased shipments, billet stocks across six commercial warehouses including two ports in Tangshan under Mysteel's tracking rose by 33,400 tonnes on week to 494,200 tonnes as of May 12. In contrast, billet inventories at the 55 surveyed re-rollers declined by 6,700 tonnes or 1.49% on week to 441,600 tonnes amid the weak demand.

Written by Anthea Shi, shihui@mysteel.com

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