Posted on 19 Jul 2022
The price of Q235 square billet under Mysteel's assessment in Tangshan in North China's Hebei province, the country's largest steel production hub, plummeted last week, falling by a sharp Yuan 520/tonne ($77.03) or 13.3% on week to hit Yuan 3,400/t EXW and including the 13% VAT as of July 15, a new low since October 19 2020.
The continuous oversupply against weak demand was to blame for the plunge, Mysteel Global noted. Besides, steel mills and traders also lowered their offers, trying to encourage sales.
Steelmakers lost even more money on billet sales last week, as the average loss borne by the ten integrated mills under Mysteel's tracking expanded by Yuan 389/t on week to a large Yuan 632/t as of July 15. The average cost of billet production incurred by these mills eased by Yuan 131/t to Yuan 4,032/t including the 13% VAT over July 7-13, but the compensation was minor.
Their heavy losses persuaded steelmakers to continue cutting production, with the average capacity utilization rate of the 126 blast furnaces in Tangshan surveyed by Mysteel dipping 0.05 percentage point on week to 71.5% over July 8-14.
Accordingly, daily production of billet among the 30 steelmakers in Tangshan under Mysteel's coverage declined by 10,000 t/d or 23% from the previous week to an average of 33,500 tonnes/day over the same period.
Meanwhile, faced with high in-plant stocks of finished products as well as the feeble demand from end-users, the re-rollers also lacked enthusiasm to produce, according to a market analyst based in Tangshan.
Over July 7-13, daily billet consumption among the 55 re-rollers in Tangshan under Mysteel's survey dropped by 11,800 t/d or 23.5% on week to an average of 38,400 t/d, while their stocks of billet at yards increased by 19,000 tonnes or 8.4% on week to 245,000 tonnes as of July 13.
In this scenario, the re-rollers were more reluctant to restock raw materials, which prompted steelmakers to keep delivering the billet to retail warehouses, the Tangshan-based analyst pointed out.
As a result, the total billet inventories in the six commercial warehouses including two ports in Tangshan tracked by Mysteel rose by 27,900 tonnes or 2.4% on week to reach 1.2 million tonnes as of July 13, a new high since the end of March 2015.
Source:Mysteel Global
