China's billet supply to remain high in H2 CY'23

China's steelmakers are expected to keep their billet production high during July-December this year as semis consumption is likely to rise overall on market expectations for the faster recovery of the domestic economy, according to Mysteel's latest report.

Over January-June, Chinese steelmakers produced a total of 14 million tonnes of billet, higher by a significant 18.4% compared with the first half of last year, according to Mysteel's survey.

During the same period, billet output among the 30 tracked steelmakers in North China's Tangshan, the country's largest steel producing hub, totalled 8 million tonnes, accounting for some 57% of the country's total, the survey showed.

The capacity utilization rate among the sampled 92 blast furnaces that mills in Tangshan host (excluding those BFs dismantled or long idled) fluctuated between 85-91% during the first half of this year, a very high level, according to Mysteel's other survey.

The steel price recovery in the second quarter encouraged domestic steelmakers to ramp up production of various items including billets, the report observed. Meanwhile, the growth in demand for Chinese billet from overseas customers had also encouraged the uptick in semis output in H1, it noted.

During January-May, China exported a total of 1.4 million tonnes of billet worldwide, nearly doubling the volume for the same period last year, according to statistics from the country's General Administration of Customs.

Regarding this year's second half, steelmakers are likely to maintain high production of semis to secure some profits, the report suggested. So far this month, steel mills in Tangshan have lifted their billet output and reduced finished steel production, as the margins they can earn from sales of finished steel products are shrinking, it pointed out. Consumption in summer usually wanes, Mysteel Global notes.

During June 30-July 6, daily billet production among the 30 steelmakers in Tangshan under Mysteel's tracking averaged 50,300 tonnes/day, higher by a large 10.9% compared with the daily average over the four weeks during June 2-29.

On the other hand, market hopes for a stronger economic recovery in the second half may lift trading activity in the domestic steel market, the report maintained, suggesting that this will guarantee the demand for billet among re-rollers and so provide support for semis prices.

During January-June, China's composite billet price under Mysteel's assessment averaged Yuan 3,752/tonne ($522/t), lower by a large 22.9% on year due to the mismatch between supply and demand. Now with market sentiment improving, domestic billet prices are generally likely to pick up during July-December, according to the report.

Written by Anthea Shi, shihui@mysteel.com

Edited by Zhenqi Yang, yangzhenqi@mysteel.com

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