Posted on 09 Apr 2021
The price spread between billet price in Tangshan, North China’s Hebei province, and rebar price in neighbouring Beijing have narrowed to less than Yuan 100/tonne ($15.3/t) since March 22, partly as billet price has been soaring at a faster pace in response to the restriction imposed on the 23 steel mills in Tangshan starting March 20 that will be in place throughout the year, as steel output and billet supplies have been curtailed as expected.
The phenomenon emerged a few times in the past decade also, usually when the supply of semis have been seriously jeopardized while rebar price could not surge as fast with the fierce competition among the producers and the end-users’ reluctance to pay even higher.
Recently, due to the constraint in billet supplies, the Q235 150mm square billet price in Tangshan has been refreshing its 12.5-year high of late, hitting Yuan 5,060/t EXW as of April 7, or up Yuan 570/t from March 19.
In comparison, the HRB400E 20mm dia rebar price in Beijing gained too with the robust demand, up Yuan 510/t over the same period, but it only reached Yuan 5,150/t despite being a new high since August 2011, according to Mysteel’s data. Both the prices including the 13% VAT.
Source: Mysteel
The different pace in strengthening saw the price spread between billet and rebar narrow to Yuan 90/t on April 7 from Yuan 150/t as of March 19, even though it was higher than zero on March 26, though this may not be long-lasting, according to the Chinese market sources, partly as this has led to higher billet imports, which may cool down the domestic billet prices.
“The higher billet imports lately are only partially to do with the domestic price surges, but the price difference is rather minor now in the spot market, so more importantly, billet supply shortage has been attracting imports steadily,” a Tangshan-based steel trader said. He noted that some steel re-rollers in Tangshan had been forced to conduct maintenance on their rolling facilities.
Despite the narrowing price gap between billet and rebar, or thinner margins in finished steel, the Chinese steelmakers have shown no inclination to revise down their production and sales plans for now.
“The profits of finished steel for us integrated mills are still pretty good (though not as high as billet), so we are not thinking of selling more billets than finished steel,” an official with a steelmaker in Hebei told Mysteel Global.
Finished steel sales have been in a seasonal peak period in China over March-April, and the daily spot sales of construction steel including rebar among 237 domestic traders has been staying above 200,000 tonnes/day since March 22, once hitting 350,676 t/d on April 1, a new record high in history since 2015 when Mysteel commenced the survey.
Source:Mysteel Global
