ASIA STEEL FOCUS: China-origin steel drives out competitors while domestic prices drop

China has restarted its steel exports, driving out global competitors from various Asian import markets while domestic prices dip.

A deal was done around $560 per tonne cfr Singapore this week for a China-origin rebar cargo, although the quantity could not be confirmed, market sources said.

“Export markets are more lucrative again now that domestic prices have fallen. Mills are now looking for better margins in overseas markets,” a seller in Singapore said.

Domestic prices in east China for rebar have fallen close to 30% in little over a month, moving down from 4,940-4,980 yuan ($759-765) per tonne on December 5 to 3,780-3,830 yuan per tonne on January 12.

Key long steel producer Shagang has also made reductions to its domestic rebar and wire rod prices in its latest list price for the January 11-20 period.

The company cut 300 yuan per tonne for HRB400 16-25 mm rebar to 4,350 yuan per tonne over the January 11-20 period. It also lowered the price of its HPB300 wire rod by the same amount to 4,280 yuan per tonne.

“Upcoming list prices for Shagang’s export prices will also likely see further drops, especially for rebar. It could be at the $570 per tonne fob China level soon,” a source told Metal Bulletin.

Major Chinese mills have slashed their export offer prices, in line with decreasing domestic prices.

One mill active in the export markets offered its rebar cargoes at $540 per tonne fob China this week, down $20-25 per tonne from last week. It seemed likely that an export deal had been concluded at these levels, traders said.

The Metal Bulletin fob China rebar index has tracked the price descent, dropping from $571 per tonne on December 22 to $555.21 per tonne on January 11.

Rebar offers from other origins, such as Turkey and India, were thin this week due to high scrap prices in Turkey boosting its rebar export offers, as well as bullish local rebar markets in India, traders said.

A similar situation has occurred in the Asian billet markets, with China-origin billet now competing with cargoes from the Middle East and CIS after first appearing last week.

China-origin billet cargoes have been offered to Southeast Asian import markets such as Indonesia and the Philippines, with deals likely done at the $535-540 per tonne cfr Southeast Asia level.

Offers for China-origin billet to Southeast Asia fell slightly to $515-520 per tonne fob China on January 12, down from $520-$530 per tonne fob a week ago while Chinese sellers became more active in seeking export sales, according to a major trader in East Asia.

CIS-origin cargoes have also been offered at $540-545 per tonne cfr Southeast Asia, with possible deals done at $535-540 per tonne cfr into Taiwan or the Philippines.

Some buyers are still wary of procuring China-origin billet, however, due to fears of non-performance, according to market sources in Asia.

“They believe Chinese mills might back out if prices go up, which was what happened in 2016,” the trader in east Asia said.

Market sources expect this situation to remain for now because of reduced demand in China before the upcoming Lunar New Year celebrations, as well as the end of production cuts in mid-March after the winter heating season.

“It is likely easier to export China-origin steel cargoes this year as compared to 2017. This is due to the possibility of higher operating rates in China from March onwards,” a Singapore-based seller said.

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