Quick-thinking Chinese traders prosper in volatile steel semis markets

Some Chinese trading firms have been quick to react and to find opportunities in this year’s increasingly volatile markets for semi-finished steel products, sources said during last week’s Fastmarkets Singapore Steel Forum

Chinese traders swiftly switched from importing steel semis at the beginning of the year to facilitating export deals for similar materials.

China-produced billet became appealing in price to Asian importers in March and April, leading to large volumes in sales from the country, Vaibhav Chaudhary, a trader at Swiss Singapore Overseas Enterprises, said on the billet trading panel on Wednesday May 18.

“Steel trade flows really changed in the past few months,” a Chinese trading source told Fastmarkets on the event sidelines, “and traders are active in dealing with transactions caused by these changes in trade circumstances.”

In the first three months of 2022, China imported 1.14 million tonnes of steel billet, down by 13% from 1.31 million tonnes a year earlier, according to Chinese customs data.

Meanwhile, exports of Chinese semis totaled 137,587 tonnes in April 2022, up from nominal exports in the corresponding month of 2021.

Russian cargo handling

Another area where Chinese trading houses have gained further prominence recently was in their handling of Russian steel billet following that country’s invasion of Ukraine in late February.

In response to that act of aggression, Russian material has come under trading sanctions imposed by many countries. But with Russian material not being subject to any similar sanctions or restrictions at Chinese banks, and with some Russian sellers happy to accept payment in Chinese yuan, some Chinese traders have increasingly been selling-on Russia-origin steel cargoes to Southeast Asia.

Payment may be trickier for some Asian importers, but the sharp discount offered by Russian steelmakers was making their billet products appealing to some importers in the region, Chaudhary said.

The sale of Russian semis into Southeast Asia was a landmark moment for Chinese trading houses, given that they were now engaging in trades which did not directly involve a Chinese producer or consumer, a senior Singapore-based trading source told Fastmarkets on the forum sidelines.

He added that it would be interesting to see whether traders continued to expand their influence in non-China trades in the coming months.

While Chinese traders have been heavily involved in such deals, some transactions for Russian semis into Asia over recent months have also been heard to involve traders based in Dubai.

China to remain a major billet importer in long term

China will continue to forge ahead as a significant importer of semi-finished steel over the next few years despite current gaps between bid prices and most offers, delegates said at the Steel Forum.

Although price differences have restricted the number of deals to China this year so far, Chinese authorities were committed to encouraging imports of semi-finished materials into the country in line with the decarbonization efforts in the steel industry, according to Andy Wang, senior manager of the international marketing department of state-owned trader China Railway Materials International.

China removed its 2% import duty on billet produced outside the Association of Southeast Asian Nations (Asean) region in May 2021, which was a move seen to encourage higher Chinese imports of such material.

Recent months have brought fewer import deals for billet into China, with Chinese importers unable to remain competitive with billet buyers in Southeast Asia amid weak Chinese local steel prices.

Fastmarkets’ latest price assessment for steel billet, import, cfr China, was $600 per tonne on May 24. In comparison, the latest price assessment for steel billet import, cfr Manila, was $650-660 per tonne cfr on May 25, putting Philippine buyers’ prices $50-60 per tonne above China’s workable import price.

Return of Philippines demand?

Imports of semi-finished steel into the major Southeast Asian import market of the Philippines also fell this year, to 323,049 tonnes in the first two months of 2021. This was down by 36.99% year-on-year from 512,735 tonnes in January-February 2021, according to data from the country’s customs department.

Demand for billet in the Philippines and across Southeast Asia has already returned in higher volumes than a few months ago, but prices were still being weakened by factors including cheaper Russian materials, Chaudhary said.

He added that the newly elected government in the Philippines was expected to provide further support to infrastructure spending, which should boost the confidence of the steel sector to purchase more billets.

The most recent deals for steel billet into the Philippines were heard last week at $680 per tonne cfr Manila for Vietnamese blast furnace (BF) material and around $670 per tonne cfr for Indonesia-origin 3sp BF billet.

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