China: Tangshan billet prices may strengthen in Apr

After fluctuating within a wide range and moving upward overall last month, billet prices in Tangshan in North China's Hebei province are expected to strengthen further this month on rising demand and high production costs, according to Mysteel's latest monthly report.

Over March 1-31, Mysteel's price assessment for Q235 billet in Tangshan averaged Yuan 3,948/tonne ($573.7/t) EXW and including the 13% VAT, being Yuan 110/t higher than that over February 1-28.

Billet prices strengthened last month in response to large decline in inventories, the data suggests. As of March 30, billet stocks across the four commercial warehouses and two ports under Mysteel's monitoring totalled 1.2 million tonnes, falling by a huge 222,400 tonnes or 15.7% from that on March 2, according to the report.

The reduction in billet stocks reflected growing demand for semis among local re-rollers, who saw their sales of finished steel improve and their profit margins widen last month, the report explained.

Over March 2-30, billet consumption among the 55 re-rollers under Mysteel's coverage averaged 52,075 tonnes/day, rising 5,625 t/d or 12.1% from that over February 2-March 1.

In the traditional season of high steel demand in spring, re-rollers are likely to maintain their output at a high level this month and gradually accelerate their replenishment of feed materials, the report predicted, which will firm the support for billet prices.

On the other hand, compared with steel prices, prices of raw materials such as iron ore and coke are high and are keeping domestic steelmakers on the brink of losing money, the report noted.

Although steelmakers in Hebei and East China's Shandong had defied their coke suppliers and cut their coke buying prices by Yuan 50-100/tonne on April 1, there is limited scope for coke prices to drop further due to tight supply, according to the report.

The 10 integrated steelmakers in Tangshan under Mysteel's tracking managed to make some profits on billet sales for three weeks in March, before the market softened and caused them to lose money again - albeit just a little. As of March 31, the losses on billet sales suffered by these sampled mills averaged Yuan 2/t, while the average cost they incurred stood at Yuan 3,902/t including the 13% VAT.

In response to the high production costs, steelmakers in Tangshan are expected to raise their billet selling prices this month to reduce their losses, the report predicted.

Written by Anthea Shi, shihui@mysteel.com

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