After strengthening in tandem with finished steel prices last month, billet prices in North China’s Tangshan will face pressure from the high stock levels across the city in February, according to the Mysteel’s latest monthly report.
Over January 1-31, prices of Q235 billet in Tangshan under Mysteel’s assessment averaged Yuan 3,815/tonne ($565.7/t) EXW and including the 13% VAT, higher by Yuan 110/t from that over December 1-31.
In January, market participants were expecting a faster recovery of domestic economic activity with the Chinese New Year (CNY) holiday approaching, and indeed, demand around the holiday break in late January grew, the report noted. The country’s steel prices firmed accordingly.
As such, steelmakers in Tangshan saw their profit margins recover last month, which encouraged some mills to increase their billet output, according to the report.
Mysteel’s survey showed that daily billet output among the 30 sampled steelmakers in Tangshan hovered in the 40,000-50,000 tonnes/day range in January, while the capacity utilization rate among the 126 tracked blast furnaces in the city reached 75.75% over January 20-26, up by 0.6 percentage points from that over December 23-26.
Steelmakers generally maintained normal production during the CNY holiday, while most traders and re-rollers halted their business for the duration of the break, as reported. Consequently, billet stocks in retailers’ warehouses kept accumulating.
As of February 2, total billet inventories across the four commercial warehouses and two ports under Mysteel’s tracking had mounted to a near eight-year high of 1.35 million tonnes, jumping 651,800 tonnes or 92.7% from January 6. This is weighing heavily on steel prices, the report noted.
“The space for billet prices to rise is obviously very limited under such pressure, though the accumulation of stocks has slowed recently,” the report stated.
Nevertheless, most re-rollers in Tangshan will resume operations after the Lantern Festival on February 5 – traditionally the last day of the CNY celebrations – and will step up billet procurement to replenish their feed material stocks, the report predicted. This inventory rebuild will provide some support for billet prices this month, it suggested.
Written by Anthea Shi, shihui@mysteel.com
Edited by Zhenqi Yang, yangzhenqi@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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