Steel traders in Asia attempt billet arbitrage to China on keen spot demand

Steel traders in Asia are trying to work out an arbitrage for at least 70,000 tonnes of billet to China in a highly unusual move, market sources told Metal Bulletin this week.

It is rare to see China looking for import cargoes as it has typically been a net exporter of steel products, a billet trader based in Singapore said.

There were bids at $515 per tonne fob Taiwan for at least 20,000 tonnes of billet to China, sources said. But Taiwanese electric-arc furnace mills have turned them down and raised their offers further to $520 per tonne fob Taiwan.

“Steel mills have received inquiries for shipping billet to China but have hesitated to agree to anything as they think prices could rise higher,” a Taiwanese trader said.

There were also inquiries made for 50,000 tonnes of billet from Chinese buyers, traders said.

Traders in China said $515 per tonne fob Taiwan was a workable level, but added that $520 per tonne fob Taiwan would surpass domestic billet prices after a 17% valued-added tax and a 2% import duty are factored in.

There were also inquiries to allocate billet volumes from India, the Middle East and the CIS region to China, with traders working hard to find shipping space and lock in freight rates to move these cargoes.

Winter production cuts implemented in north China under a national pollution control drive have caused rebar prices to skyrocket, supporting the demand for imported billet.

In east China, rebar prices are almost at a seven-year high, having risen to 4,980 yuan ($753) per tonne on December 5. The last time rebar prices were at these levels was in August 2011, when prices rose as high as 4,950 yuan per tonne.

Chinese traders said that Iran-origin billet had already been sold to China, although details on the quantity and discharge laycan were not immediately available.

Import prices in the major markets of Philippines and Indonesia have also climbed, with traders seeing a marked increase in demand in these two markets.

“There has been a huge shift in sentiment since last week. Prices have climbed up strongly to at least $505-510 per tonne cfr Southeast Asia,” a trader based in the region said.

There was also market chatter about a Russia-origin cargo being sold at close to $520 per tonne cfr Southeast Asia, although some market sources dismissed it as unworkable for most spot buyers.

Metal Bulletin’s assessment of billet prices in Southeast Asia was $495-504 per tonne for the week ended December 4, which marked a third week of increases in the region for the semi-finished product.

Jessica Zong in Shanghai contributed to this report.

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