China’s billet supply may fall 2.5-3 million tonnes on year in the second half of this year, mainly due to the frequent restrictive measures on steel mills to reduce emission as well as Beijing’s continued curbing on country’s steel capacity, Mysteel shared its near-term outlook on this steel semis.
The on-year supply reduction in H2, however, will be less than that in H1, as China’s billet supply declined 4.4 million tonnes or 23.7% on year to 14.1 million tonnes over January-June, Mysteel pointed out.
This is partly due to the fact that starting July 1, those mills classified in a lower ranking because of their higher emission in Tangshan, North China’s Hebei, will be imposed on a lighter curbing of 30% on their steel capacities instead of 50%, and this will enable them to supply more billet than in H1.
The steel capacity restrictions on 23 steel mills in Tangshan saw local billet supply reduce by nearly 47% on year to 5.5 million tonnes in total over January-June, Mysteel added.
For the whole 2021, China’s billet supply to the spot market may reduce by 7.5-8 million tonnes, though the actual reduction will largely depend on the preference of the steel mills in steel sales, as they tend to shift between semis and finished steel just to maximize their profitmaking, just as what happened in H1, Mysteel pointed out.
Besides, some new steel capacities will be commissioned across the country for the remainder of the year, which will also add on some billet supplies to the spot market in the second half.
As for China’s billet demand over July-December, the volume may grow 10,000 – 15,000 tonnes/day from H1, as many new rolling mills may be commissioned in Tangshan, mainly to produce narrow strips.
Great uncertainties, however, will hover over the actual capacity utilization rates of the existing and new rolling mills in Tangshan, given that it has become a common practice for the local authorities to halt these re-rollers whenever air quality is poor, and billet consumption in H2 may just as well vary little from H2, the report highlighted.
As for China’s steel semis imports in H2, the volume may decline notably from H1, partly as overseas demand will pick up and the disappearing pricing competitiveness of the overseas supplies may seriously dampen Chinese buyers’ enthusiasm even though over January-May, China imported 4.4 million tonnes of steel mills, or up 45.7% on year because of the lower prices, as reported.
Under all the circumstances, China’s billet market may continue to be a seller’s market with the price mainly decided by the supply, though the operations of the steel re-rollers and their profitability will show its impact now and then too, leading to price fluctuation, but the average price is unlikely to surpass that for H1.
For H1, Mysteel’s national billet price index averaged 4,894.7, up 48% on year, but the average profit of billet only gained Yuan 13/tonne ($2/t) on year to Yuan 307/t, as the price had experienced serious volatility and steelmaking production costs had been persistently higher on year.
Written by Olivia Zhang, zhangwd@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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