Chinese billet price drops to new 10-year low

The price of billet in the northern Chinese city of Tangshan has fallen to a new low after flatlining over the first ten days of June.

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Local major billet producers Xinglong Steel and Guoyi Steel as well as those in the Changli region cut their ex-works price by 40 yuan ($7) per tonne over the weekend, which resulted in the semi-finished product trading at 1,900 yuan ($310) per tonne on Monday June 15.

This is the product’s lowest price since 2005, according to local information provider Custeel, which started tracking it that year.

Market participants attributed the decline to subdued demand.

“The billet price was steady at the beginning of June, as there were a lot of overseas bookings for square steel at that time,” a trader based in Beijing said.

“But after fulfilling those orders, the producers could not keep the prices unchanged due to thin sales on the domestic market,” he added.

Sources say the prices drops are far from over.

“June is the payment month for bank loans, so steel mills will try to maintain sales volumes by lowering prices to maintain their credit lines, even if it means more losses for them,” another local trader told Steel First.

“But taking the current strong iron ore prices into account, if the losses rise to their psychological threshold, steel mills could shut down their blast furnaces for maintenance and re-rollers might halt operations temporarily to stabilise the market,” an analyst in Beijing said.

The Metal Bulletin 62% Fe Iron Ore Index was at $65.13 per tonne cfr Qingdao last Friday, up $3.28 per tonne from May 29.