Offers of cheap Chinese steel billet ring alarm bells in Asian markets
Low-priced offers of steel billet from China have significantly depressed sentiment in the key Southeast Asian steel market, sources told Fastmarkets on Tuesday October 25
China’s steel markets have fallen over the past week amid patchy demand and weak data from the property sector, according to market sources, making China-origin steel products more appealing to export markets.
Futures on the Shanghai Futures Exchange (SHFE) fell again for both hot-rolled coil and rebar on Tuesday, while physical steel prices also dropped on the day. The weakness of the Chinese yuan against the US dollar also led to Chinese export prices for HRC falling to a two-year low on Tuesday.
As a result, Chinese traders were heard on Tuesday offering cargoes of China-origin billet to a range of markets including Taiwan, Southeast Asia and Turkey.
Chinese mills were selling their billet to traders in yuan, and traders will handle any export transactions, Fastmarkets understands. Fastmarkets’ daily price assessment for steel billet, domestic, exw Tangshan, Northern China, was 3,630 yuan ($497) per tonne on Tuesday, including value-added tax.
It was not immediately clear how many of the cargoes offered concerned billet produced by Chinese mills and how many were made up from Russia-produced billet previously imported into China, re-badged and re-exported, which is a practice that some Chinese traders have been heard to adopt on occasion.
The Philippines imported 126,262 tonnes of billet from China in the first half of 2022, according to Filipino customs data, but a portion of these volumes was believed to be for resale, sources said.
Offers of billet to be shipped from China were heard around $500 per tonne fob on Tuesday to Southeast Asia for grade 3sp, sources said. With freight and quality differentials added, these offers would be equivalent to around $530-535 per tonne cfr Manila, basis grade 5sp, sources estimated.
Offers to Taiwan were heard even lower, at $500 per tonne cfr for 3sp, according to a Japanese trading source and a Taiwanese trader. At such a price, the traders offering must be taking an aggressive short position on these cargoes, sources said.
Similarly, an offer of Chinese billet was heard at $545 per tonne cfr Turkey on Tuesday, but found no interest among buyers, according to an Indonesian steelmaker source. Turkish buyers were last heard bidding $550-555 per tonne cfr for billet on Thursday of last week.
There were rumors that a cargo of more than 20,000 tonnes of Chinese 150mm grade-3sp steel billet was booked by an importer in Southeast Asia late last week at $510-515 per tonne cfr. While one market source believed the buyer to be a mill in the Philippines, a second source had heard that if the deal had been agreed, it was to an Indonesian buyer.
Effect on markets
The large volume of Chinese material hitting the market led to a drop in Philippines import prices, sources said.
“Chinese billet making the rounds is really spooking the market. Personally, I doubt any transactions [were done], although it is true that the China export [arbitration windows] for billet are open on price,” a major Singapore-based trading source told Fastmarkets on Tuesday.
The billet market is shrinking, demand seems to be lost [and] there are no bids from buyers in Manila
“The billet market is shrinking, demand seems to be lost [and] there are no bids from buyers in Manila,” the Indonesian mill source said.
“Demand will drop more in the next few months and the price could go down further,” the first Japanese trader said. He added that another telling sign of poor demand in Asia was that a Japanese steelmaker was considering the possibility of exporting pig iron, due to a lack of orders for finished steel.
Mill offers of 5sp blast furnace (BF) billet were heard at $545 per tonne cfr Manila from Malaysia, and at $525-535 per tonne cfr from Indonesia. Bids were very scarce, with a bid at $510 per tonne cfr for 5sp the only buying interest heard this week.
Fastmarkets’ price assessment for standard 5sp steel billet, import, cfr Manila, was $520-525 per tonne on Tuesday, down week on week by $5-10 per tonne from $530 per tonne.
Traders sold a position cargo of Malaysian 5sp billet to a buyer in the Philippines at $510 per tonne fob over the weekend, for November shipment, according to one market participant. Sources said that the deal would work out around $530-535 per tonne cfr Philippines, but it was discarded from Fastmarkets’ calculation because it was for a prompt shipment.
Other deals done
Another factor pushing down Asian prices was the presence in the market of low-cost Russian steel billet. A cargo of Russian 3sp billet was heard sold last week at $505 per tonne cfr Taiwan, sources said.
An offer of Russian Far East electric-arc furnace (EAF) billet was heard at $505 per tonne cfr Taiwan on Tuesday. Other Russian billet offers were heard at $515-525 per tonne cfr Taiwan on the same day.
A mill in Taiwan was also heard to have purchased 10,000 tonnes of Japanese high-vanadium billet at $545 per tonne cfr late last week.
Furthermore, a deal for 5sp BF billet from Malaysia was heard done to Indonesia at $538 per tonne cfr last week.
Mills in Malaysia currently preferred to sell to Indonesia and Thailand than to the Philippines because of the cheaper freight costs, a mill source in Malaysia told Fastmarkets.