SteelOrbis Shanghai
The environmental protection storm stirred up by
China's State Environmental Protection Administration (SEPA) has acted as a catalyst on the country's ready-to-rise semi finished market. Throughout the past week,
China's
semis prices shot upwards, while very brisk commercial activity was observed. As a result,
semis producers are expressing confidence about the future.
On January 24, the price of common carbon
billet in Tangshan, Hebei Province has risen RMB 130/mt ($17/mt) to RMB 2,950/mt ($380/mt), while that of 20MnSi was up RMB 80/mt ($10/mt) to RMB 2,950/mt ($380/mt). As regards
slab, the ex-factory price from
Laiwu Steel has risen RMB 100/mt ($13/mt) to RMB 2,950/mt ($380/mt).
In order to tackle the worsening pollution problem, SEPA issued a new environmental protection policy on January 10, thereby stirring up another storm in relation to this sensitive issue. According to the new policy, if listed enterprises do not cut pollution and energy
consumption as they had promised, then approval of any new
construction projects will be suspended in the regions concerned.
In
China, medium- and small-sized firms account for a large part of the
billet trade, and this is especially true in the case of Tangshan. According to some local market insiders, under pressure from SEPA, the Tangshan Municipal Government held a number of meetings in succession in order to deal with the enterprises responsible for high pollution levels. Many mills causing serious pollution have already stopped
production, leading to a decline in the
pig iron and
billet supply. Starting from last Monday, the mills' ex-factory prices even saw changes per half-day. The rolling mills were also aware of the inevitable soaring tendency ahead for
semis prices and thus began to be very active in purchases.
Billet prices consequently saw a sharp jump in levels.
However, it should be pointed out that this latest environmental protection storm has acted only as a catalyst for the strong increase in
semis prices. In fact, the renewed activity in both the international and domestic markets is the root cause that pushed prices up.
At present, apart from the slow
rebar market, the major steel products, such as section steel, steel strip,
wire rod etc., all saw increases in the domestic market, thus boosting up
billet prices. In particular, due to the recent good levels of section steel exports, section plants are very active in
billet purchases, and this forces the other rolling mills to accept the relatively high
billet prices.
Meanwhile, the demand for Chinese
billet has also begun to increase in
Southeast Asia. Currently, the latest
billet quotations to
Taiwan and Vietnam have reached $445/mt CFR, up $10-15/mt compared with the end of December.
Nevertheless, upset about this rapid increase in such a short time, some rolling mills continue to stand aside, preferring to adopt a wait-and-see attitude. Also, the importers need time to digest the latest export quotations. Therefore,
China's
billet is subject to downward pressure in the short run, though the market seems destined to maintain its upward tendency in the longer term.