Though prices in the Chinese billet market have been dropping since late last week, this week the pace of the fall has accelerated, and today, August 14, local and export billet prices have again hit the lowest levels seen in a number of years, recalling the peak export year of 2015. Weak credit data and a three percent drop in futures prices have contributed to this situation.
The SteelOrbis reference price of 3SP billet from China has hit $430-435/mt FOB, dropping by another $10/mt in just one day, and $20/mt lower than last Friday. “This price is correct, but prices have dropped too much and buyers are all hesitating, so we have many offers and only a few deals,” a large Chinese trader said. The previous sale was heard at $440/mt FOB early this week, and some market sources believe that it was for a long position. Another large trader commented that this week there will be more deals in short positions on CFR basis, which is usual for such a falling market.
“At present, debar has touched a seven-year bottom and HRC is at a four-year low. Local prices are in chaos and most mills changed daily base prices two or three times by RMB 40-60/mt,” one more Chinese source said.
Chinese banks’ new RMB-based loans amounted to RMB 260 billion ($36 billion) in in July, down by 88 percent from June and the lowest in 15 years. Of course, this signals that the government will take measures and that the amount will rebound in August and September, but this has been seen as a “worrying factor” for the whole market.
At the same time, the Southeast Asian import billet market has been lagging behind of Chinese FOB market with a lot of rumors and negotiations. A deal for Chinese 3SP billet has been rumored to Southeast Asia at $450/mt CFR. Bids have already fallen to $440/mt CFR for this grade. A number of market sources believe that prices have dropped too much and too fast, and that a rebound to “reasonable levels” will come next.
ASEAN mills are not in a hurry to drop prices. Indonesian offers are not below $445-450/mt FOB as long as the market needs more time to adjust. Also, after a deal for a Malaysian mixed cargo of billet and slabs at $505-515/mt CFR Turkey, another one for 40,000 mt of Malaysian billet from another mill to Turkey was disclosed at $510/mt CFR. The higher price is due to the absence of the duty on Malaysian materials in Turkey.
Average local Chinese ex-warehouse prices have settled at RMB 3,003/mt ($420/mt), down by RMB 30/mt from the previous day. Ex-Tangshan billet on ex-works basis is at RMB 2,970/mt ($416/mt) today.
$1 = RMB 7.1415