What is Driving Billet & Slab Imports to China?

China has aggressively resumed imports of semi-finished steel products - billet, pig iron, and slab. Recovering economy and pick-up in construction activities continue to keep imports supported, said Mr YK Shin, CEO Pan Korea Metal Company, South Korea. Below is an edited excerpt from his recent interview with SteelMint.

-- What is driving billet and slab imports to China? How much quantity Chinese traders would have booked in March?

The demand for semi and finished products in many countries is getting slow amid the COVID-19 outbreak. While on the contrary, China is in a totally different situation as-

China is the only economy, which is recovering from the pandemic. With the resumption of construction activities, trades have gained momentum in the country.

China has better control over its demand-supply system than any other country. Currently, the country is focusing on domestic stimulus especially on SOC and construction, for maintaining the growth rate. They are facing slow demand from the overseas market.

China has a humongous steel supply-demand. The country produces 58% of the world steel and has 53% consumption of the world steel. Depending upon the situation, the country is so competent and flexible that it may switch to imports if prices turn cheaper than in the domestic market.

China imported 1.2 MnT of billets during in Jan-Feb'20. During Apr-Jun'20 it is expected that individually billet and slab imports may reach 1-1.5 MnT mark.

-- We understand these cargoes are booked largely by traders. How do traders cover their risk?

There are two ways to hedge the risk.

1) Traders cover their risk from future markets of deformed bar in case of billet and from HRC in case of slab. After they buy cargoes, they sell it from futures market depending upon the cargo arrival time.

2) Traders always carry some cash as a security deposit from re-rollers in RMB or USD. Future market trend is most important factor for the importers.

-- What are present price levels for billet imports to China? What are import taxes on importing billets/slabs from different countries?

In the current situation, the prices are quite buoyant in China. During 10-15 Mar'20, prices were noted at USD 400-405/MT CFR levels from the Asian counties. While during 23-37 Mar'20, it dropped to USD 381-382/MT CFR levels. And by the end of Mar'20-early Apr'20, Chinese customers started bidding at USD 345-350/MT CFR levels, due to the sharp decrease in future market. However, no deals were witnessed at this price level. After 6 Apr'20, billet import prices in China are expected to be USD 345-355/MT CFR levels.

During last week; Chinese mills booked large parcels. Meanwhile, Slab offers from Russia are continuously declining the country, from USD 400/MT during early Mar'20 to USD 358/MT during the mid-Mar'20. Towards end-Mar, offers from Vietnam were assessed at USD 335/MT and further drop is expected, going forward in Apr'20. Clues can be witnessed with the above-mentioned deal.

In China, there is no Import tax on SE Asian origin billet and slab. While, there is an import tax of 2 % on non-SE Asian origin billet/slab like India, Russia, Turkey, etc.

-- How long will Chinese continue to import semi- finished goods?

It totally depends upon how quickly the COVID-19 affected countries get cured from the impact. Once the major billet exporting countries get free from lockdown guidelines, the billet imports in China will fall dramatically. At least 3-6 months from now is expected for trades to come to routine in the affected countries. This is made all the major billet exporting nations combative for supplying the billets to China, as due to the pandemic, other billet consumers are largely lockdown. China will have huge demand at a reasonable price than the Chinese future market.

To read complete interview - please click here