China: Tangshan billet prices seen weakening in Nov

Carbon steel billet prices in Tangshan in North China's Hebei province are likely to keep sliding this month after last month's steady decline, as domestic steel consumption will enter the traditional slack season while raw material prices may continue falling, according to Mysteel's latest monthly report.

As of October 31, the Q235 billet price in Tangshan as assessed by Mysteel had dropped to a three-month low of Yuan 3,450/tonne ($471.5/t) EXW and including the 13% VAT, down by Yuan 250/t from September 30.

"Poor sales saw finished product inventories accumulate among re-rollers in Tangshan, making them less enthusiastic about producing and more cautious about procuring feed materials," the report quotes a market analyst based in Tangshan as saying.

Mysteel's survey showed that total stocks of finished products among the 55 sampled re-rollers in Tangshan as of October 27 had increased to a near four-year high of 821,500 tonnes.

Under such circumstances, billet demand has waned significantly in the city and placed major pressure on prices last month, according to the report.

"Re-rollers are seeing little improvement in demand from their customers as the slack season for steel consumption is approaching, so they are facing tighter cash-flow conditions now," the report said, noting that the rollers are producing at low capacity-utilization rates in response to their narrowing profit margins.

Consequently, retailers' billet stocks across four commercial warehouses and two ports in Tangshan under Mysteel's tracking have rebounded after falling for three consecutive weeks in October to reach 556,700 tonnes as of November 3. This too will weigh on billet prices this month, the report pointed out.

Besides, prices of raw materials such as iron ore and coke are barely providing any support for billet prices, Mysteel's survey showed, as raw material suppliers cannot defend their offers amid sluggish consumption.

For example, coke producers in Hebei and East China's Shandong have accepted a cut of Yuan 100-110/tonne in the purchase prices local steel mills are paying for their coke, as Mysteel Global has reported.

This has lowered some input costs for steelmakers, with the average cost of producing billet incurred by the ten integrated mills in Tangshan under Mysteel's coverage easing by Yuan 98/t on week to Yuan 3,717/t including the 13% VAT over October 27-November 2.

However, the average loss they suffered when selling those semis remained serious at Yuan 267/t as of November 3, Yuan 32/t larger on week, Mysteel's data showed.

Written by Anthea Shi, shihui@mysteel.com

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