Despite the recent slump in demand and prices for imported billet in China and overall reduction of volumes coming to China in comparison with 2020, the semi-finished imports will remain an important part of the Chinese market for the coming 2-3 quarters at least, according to the opinions collected by SteelOrbis from the market.
Average monthly semis imports to China drop to 1 million mt in 2021
In 2020, China imported a record 18 million mt of semi-finished products, according to China’s customs, due to crude steel production limitations and severe Covid-19 situation globally. This means that the average monthly imports was 1.5 million mt last year, some months showed shipments even at above 2 million mt in some months of 2020. Demand from China supported strongly and in some opinions even saved a number of steel producers over the world.
This year the trend continued, but the volumes visibly declined and market sources started to question how long can it last? In January-September 2021, the imports of semis to China totalled 9.4 million mt, or 1.04 million mt per month on average. In September, for instance, the total import volume of billets and slabs was 1.46 million mt, up 30 percent from August, showing stronger demand in summer, when most September shipment cargoes were booked, but still around 20 percent down on year.
The restrictions for energy use started to impact demand for billets in China since late September, especially in the northern Tangshan in Hebei province and in eastern Jiangsu province. Making the sentiment more uncertain.
Expectations for Q4 of 2021 and Q1 of 2022
“We do not see much opportunities to induce more semis imports in China, because following the softening GDP growth ratio and cooling down in real estates, China domestic steel demand would be slowing down, too. The situation would cause China domestic demand-supply to be more balanced than before, said, export and import volume would be significantly cut-down in following quarters,” a China’s trading house representative said.
This negative view on import volumes trend is shared by most market participants for the period from December till March. “For October and November we will not see a drop as billets are on the water and demand was good in September. In winter imports will be much less for sure,” an international trader said.
“We are clearly at an inflection point, where the Chinese market and the international market are dislodged,” a source from Singapore said in the middle of October after the fall in futures and import billet bids from China.
Lower imports of billet to China during the winter months are expected also because traders are trying to redirect cargoes for November and December shipment, which they bought initially for China. Deals have already been reported to Indonesia, Thailand, Taiwan and Turkey.
Nevertheless, since restrictions for power use in Tangshan and Jiangsu may soften from November at least for the short period of time, the billet demand will also improve, though it will hardly return to the previous level seen in the most part of September. And in a longer term outlook, most market participants agree that China will continue billet imports, though the volumes may be reduced. “We are not offering as China is very weak now. But the price may rebound later and demand will return,” one of the suppliers said. “China’s imports will not stop as crude steel production cuts are expected to be strong by mid-March,” a trader from Singapore said.
Some market sources believe that, when energy supply problems will be less harsh in spring and demand for the construction steel may be supported by a seasonal factor, China will return to more active billet purchases.
This year started in terms of prices from the level of $600/mt CFR for imported billet in Asia and China was buying billet at even $555-575/mt CFR in February, according to SteelOrbis data. The highest deal price, seen in September, reached $710-720/mt CFR. A lot of factors contributed to the sharp rises, including rising costs and surging freights (in some cases in 3 times).
Imports of finished steel
In the January-September period this year, China imported 10.716 million mt of finished steel, down 28.9 percent year on year. If in 2020, China was active in HRC imports, which led to a very sharp increase in finished steel imports, in 2021 the major part of it was in the more traditional segments, like special steel and wire rod, for instance.
“China is buying wire rod time to time, when the prices are ok,” a Southeast Asian source said, adding that the recent buying seen from China supported regional suppliers, who faced weakening demand for wire rod in the Philippines and Thailand due to Covid-19 outbreak lately.
There were some talks about a possibility of rebar imports to China due to severe production cuts. But since the prices have been falling sharply in October, and the overall demand situation is not promising for now, it is unlikely in any sizable volumes.
“As you know, China's construction and real estates slowing down, such as taking into account the case of Evergrande, I don't think China would have more demand to import rebar,” a Chinese source said.