Chinese steel billet buyers have booked large volumes of material this week at ever-higher prices while Southeast Asia consumers have been largely forced to remain on the sidelines, sources told Fastmarkets.
There were deals for Vietnamese blast furnace (BF) billet of 3sp quality from two different mills at $580 and $582-583 per tonne fob in recent days for shipment to China, with trading sources on Friday estimating the shipments at the equivalent of $600-603 per tonne cfr China.
Deals of Vietnam BF billet were closed to traders selling onto China earlier in the week at $575-578 per tonne fob.
Indian 3sp BF billet ***
Indian 3sp BF billet was heard sold to China on Thursday at $550 per tonne fob, which would work out at $585 per tonne cfr China, according to a source with knowledge of the deal. Non Asean-origin billet, such as from India, incurs a 2% import duty to China, meaning that the all-in cost on this transaction would be around $597 per tonne cfr.
Prices were boosted by a spike in bulk freight rates this week amid mounting oil costs and a shortage of vessels. The cost for the Vietnam-China route for steel in bulk rose to $18-22 per tonne compared with $15 per tonne previously. The India-China route for bulk steel rose to $30-35 per tonne, up from $22 per tonne before.
Another reason for the higher prices was a jump in scrap prices in the Asian markets this week, sources said, which is raising billet production costs.
Fastmarkets’ daily price assessment for containerized steel scrap, HMS 1&2 (80:20), US material import, cfr main port Taiwan was $425-430 per tonne on Friday February 26, widening upward by $5 per tonne from Thursday’s price and up by $15 per tonne from $410-415 per tonne on February 19.
China domestic boost ***
China’s appetite for higher steel billet prices has been supported by a firm domestic market this week.
As at 3pm on February 26, billet was being traded at 4,290 yuan ($665) per tonne including value-added tax in Tangshan, up by 20 yuan per tonne from a day earlier, according to Fastmarkets’ steel billet domestic, exw Tangshan, Northern China assessment.
Trading houses raised billet intake to replenish inventories ready for business in March and April because they are bullish on demand for downstream products, such as steel sections and rebar.
The production cost of billet in Tangshan mills was at 4,250-4,260 yuan per tonne on Friday, which was another reason to support an increase in market prices.
The billet price in Jiangyin, where most imported billet is typically shipped to, was at 4,390 yuan per tonne ex works, equivalent to $600 per tonne excluding 13% of value-added tax, sources said.
Southeast Asia left behind ***
While the price action has been continuing in China, Southeast Asian markets have been left on the sidelines.
Offer prices for Far East Russia-origin 5sp billet were heard $603-605 per tonne cfr Manila on Friday, up from $590-595 per tonne cfr earlier in the week. Vietnam-origin BF billet was heard offered at $600 per tonne cfr Manila on Thursday, but trading sources said on Friday they doubted the material would still be available at this price.
Far East Russia-origin 5sp billet with high vanadium content was heard sold to Taiwan at $600 per tonne cfr.
Bids from Philippine steelmakers for standard 5sp billet were heard at $570-575 per tonne cfr Manila on Friday, but traders said that this was far below the level at which sellers were willing to part with material.
Steel billet billet in Southeast Asia ***
Fastmarkets’ daily price assessment for steel billet, import, cfr Southeast Asia, which mainly looks at 120-150mm 5sp grade billet sold into the Philippines, was $585-595 per tonne cfr on Thursday, up $5 per tonne from $580-590 per tonne day on day and up $15 per tonne from $570-580 per tonne week on week.
“Our domestic market is stagnant and many buyers are on the sidelines believing that this price increase may not be sustainable,” an Indonesia steelmaker source said.
“We need to see if China will [keep] buying in hordes,” he said, adding that fundamental demand for billet in Southeast Asia is currently low.
Steel billet in Philippine market ***
Difficulties in getting customers to raise their buy prices for finished steel is limiting what Philippine mills can pay for billet in the current market, a Philippine trading source told Fastmarkets.
“To increase the price of rebar, it takes a while for customers to accept this whereas if the market suddenly drops, customers are faster than lightning to ask for a very low price,” he said.
“The Philippine market is not in much of a rush to book right now. It is at least 10 days until they will get desperate for material,” a South Asian trader said on Thursday.
High freight costs were making it even more difficult for Asian buyers to engage in the market, a European trader said.
“In Asia, the only billet business is in China – the rest of Asia cannot absorb these prices,” he said.
“Buyers in Southeast Asia are baulking at current prices and to be honest the biggest problem is freight, which has gone crazy. People are not committing to freight rates now,” he added.
Meanwhile, a seller source said he thought Philippine mills will soon have no choice but be ready to pay $600 per tonne cfr for 5sp billet.
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