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Local major billet producer Xinglong Steel and Guoyi Steel as well as those in the Changli region cut their ex-works prices by 20 yuan ($3) per tonne late on Friday July 3 and then by a further 70 yuan ($11) per tonne over the weekend.
This resulted in the semi-finished product trading at 1,730 yuan ($282) per tonne on the morning of Monday July 6.
This is the lowest that the price of product has ever fallen to since 2005, when local information provider Custeel started tracking it.
Before the latest drops, the price had been hovering at 1,820-1,830 yuan ($297-299) per tonne for more than two weeks, since June 18. It had remained flat at 1,820 yuan ($297) per tonne for most of last week.
“The narrower and narrower gap between prices for finished steel and billet drove producers to slash the price of semi-finished products,” a trader based in eastern China said.
Benchmark grade III 16-25mm rebar was trading at 1,900-1,950 yuan ($310-318) per tonne in Shanghai on July 3, down as much as 170-180 yuan ($28-29) per tonne from those on June 18.
Iron ore prices have also experienced a sharper decline in recent days. The Metal Bulletin 62% Fe Iron Ore Index dropped from $59.20 per tonne cfr Qingdao to $55.63 per tonne cfr overnight from July 1 to July 2.
Member mills of the China Iron & Steel Assn also saw their finished steel inventories rise about 10% last month to 17.46 million tonnes.
As such, steel prices are likely to be dragged down further amid slow buying and the increase in inventory levels.
“Construction activity is coming to an end gradually and new construction projects will not begin at least until mid-August, which implies that steel demand will not improve over the next month,” an analyst at Bank of China International Futures told Steel First.
The price of billet in northern China’s Tangshan city has fallen below 1,800 yuan ($294) per tonne for the first time, sending it to its lowest level since at least a decade.