Posted on 10 Dec 2020
Billet stocks at traders in Tangshan city, China’s top steel and billet supply hub in North China’s Hebei province, reached 174,600 tonnes as of December 3, a low since December 12 2019, according to Mysteel’s latest weekly survey. Local steel re-rollers returning to normal operations after being freed from government-imposed production bans from November 18 led billet supply to tighten.
Billet stocks at the 14 trading houses Mysteel checks declined for the second consecutive week last week, plunging by 78,700 tonnes or 31% on week to reach a one-year low.
Meanwhile, the semis’ inventories held by the 53 Tangshan steel re-rollers under Mysteel’s survey also declined fast, tumbling by 127,100 tonnes or 27.5% on week to 335,300 tonnes as of December 2, the lowest since Mysteel launched the new samples in June.
In contrast to the fast depletion of billet stocks, inventories of finished steel at the 53 Tangshan re-rollers reached this year’s second highest level at 697,800 tonnes also as of December 2, up 65,100 tonnes on week.
“The market’s high finished steel stocks and low profits meant that even the re-rollers were losing money – which forced some to scale down production. As a result, they’re very cautious about taking on additional supplies of new billets,” an industry source based in Tangshan city observed. Those re-rollers making narrow strips (from billet) can earn margins above Yuan 100/tonne ($15.3/t) but those producing section steel are making losses of Yuan 30-40/t, she added.
Last week, daily consumption of billets at the 53 re-rollers reversed down by 20,200 tonnes/day on week to an average of 83,600, according to Mysteel’s survey, about the same level the rollers were producing before the production ban took effect and despite of the reduction at a few rolling mills, Mysteel Global noted.
On the other hand, average billet supply from 30 integrated steel mills in Tangshan was 53,800 t/d, up 10,400 t/d on week. This, together with billets from Northeast China, amounted to 55,800 t/d, according to the survey, showing that the gap between supply and demand still exists, Mysteel Global noted.
“The supply gap and the fast decline in stocks are applying upward force to billet prices. However, the narrow profits, and high finished steel stocks, are exerting downward pressure,” the source noted.
“Sentiment is gradually turning cautious, and this might be the factor that determines how prices move in the near term,” she told Mysteel Global.
As of December 4, the Tangshan Q235 150mm square billet price stood at Yuan 3,580/t EXW and including the 13% VAT, down Yuan 40/t on week but up Yuan 120/t on year.
Written by Olivia Zhang, zhangwd@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
Source:Mysteel Global
