China’s billet price recovers from slide, but some downside foreseeable

China’s billet price recovered slightly on Friday March 15 after falling in the four days of the week on worries about high inventory levels and low demand.

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The price in Tangshan regained 50 yuan per tonne on Friday to 3,250 yuan per tonne, having shed 80 yuan per tonne up till Thursday.

Billet stocks in the Tangshan area have risen to 1.98 million tonnes as at Thursday March 14, compared with 1.62 million tonnes on February 16, the first trading day after the Chinese New Year holiday, according to data provider Mysteel.

Demand from Tangshan-based re-rollers became even weaker after the local government started a crackdown on 128 steelmakers on suspicion of breaking environmental regulations.

Several re-rollers were forced to shut down.

But some market participants remain relatively confident about the billet market despite the concerns.

“When we talk about the high inventory, we need to know who is holding this stock,” a Tangshan-based trader said.

Large state-owned trading companies are believed to own most of the stock.

“Their cash flow is not as tight as others, especially the private ones. They will support the prices,” the trader said.

“The impact of the environmental crackdown on re-rollers won’t last very long. They will restart immediately after the inspections,” a Beijing-based analyst said.

Billet prices are now 150-200 yuan per tonne lower than mills’ production costs.

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