Posted on 25 Jan 2022
Billet suppliers in Tangshan, China's top steel producing city in North China's Hebei, have been firmly supporting billet prices over the past week, although buyers have been quietly leaving the market one after another for their Chinese New Year celebrations over January 31-February 6, according to Mysteel's latest weekly report.
As of January 21, the Tangshan Q235 150mm square billet price had reached a 2.5-month high of Yuan 4,440/tonne ($701.4/t) EXW and including the 13% VAT after increasing by another Yuan 10/t on week, according to Mysteel's assessment.
"High costs and low stocks are prompting steel mills to buoy up billet prices," an industry source based in the city noted.
Mysteel's survey across ten local integrated mills showed that their cost of producing billet had increased by Yuan 68/t on week last week to Yuan 4,207/t, with the result that their gross margins shrank by Yuan 58/t on week to average only Yuan 233/t as of January 21. Moreover, their net profits will be even lower because their selling, administrative and other expenses of around Yuan 150-200/t need to be deducted, Mysteel Global noted.
In the meantime, local billet stocks indeed remain at a low level. Another Mysteel survey found that as of January 20, billet inventories at 15 commercial warehouses in Tangshan had hit a seven-month low of 282,500 tonnes, after falling for the fifth consecutive week by another 800 tonnes.
On the other hand, even though stocks of the semis at 55 steel re-rollers in Tangshan regularly checked by Mysteel had reversed up by 24,300 tonnes on week to 501,400 tonnes, the total stocks were nonetheless still at their second lowest level this past month.
Tangshan market sources suggest that billet supplies could decline further in the near term, as the city has recently strengthened restrictions on local steel producers for air pollution reduction until March, or until the end of the "winter heating season" - the months when coke-fired boilers for household heating frequently cause heavy smog, as Mysteel Global reported.
But meanwhile, billet buying will shrink further too, as steel re-rollers have been gradually suspending operations for the holiday celebrations, and billet traders' buying and selling are weakening too amid the strong holiday mood, market sources observed.
Source:Mysteel Global
