On October 1, Chinese customers have left the market for a week-long holiday and most billet market sources in Asia are waiting for their return to see the direction of the market. A few firm offers from Chinese traders were voiced at $425-430/mt CFR early this week, according to sources, which means that the difference between price ideas of Southeast Asian and Chinese customers has narrowed. Billet importers in the Philippines have been waiting for $440/mt CFR, while bids from Thailand and Indonesia have been heard at $435/mt CFR or slightly lower. For now, offers from major producers and traders in Asia are at $442-450/mt CFR.
At the same time, even if China resumes buying after the holiday, it will not be buying in such big quantities as before, sources believe. The price gap between local and import prices has remained high for now. Many Chinese traders still have their price ideas below $420/mt CFR. The domestic billet price in Tangshan was at RMB 3,300/mt ($485/mt) ex-works on September 30, the last working day before the holidays. If excluding 13 percent VAT and the import tax, this level translates to $422/mt. “Chinese traders will import only at a very good price,” a source said.
One of the reasons for the possible resumption of billet imports in China is the expected restriction on production. Starting from October, restrictions will be implemented for steel enterprises to control emissions and to speed up the ultra-low emissions transformation of the steel industry. According to the draft plan of the Ministry of Ecology and Environment of China, by the end of December 2020, a total of 200 million mt of steel capacities in China should meet the ultra-low emissions norms, including 110 million mt of facilities in Hebei Province, 12 million mt in Tianjin, 40 million mt in Shandong, 13 million mt in Henan, 20 million mt in Shanxi and 6 million mt in Shaanxi. Large-scale enterprise groups like Jianlong and Shanxi Iron and Steel must finish transformation works by the end of March 2021. The mills which will not meet the ultra-low emissions norms will face production restrictions established by the local governments, the same as in previous years.
Though it is still too early to say that steel production will be hit hard, some decline in northern China is inevitable, which will stimulate demand and prices for billet in Tangshan, sources believe.