Demand for billet from steel re-rollers in Tangshan, China’s top steel producing city in North China’s Hebei province, shrank over June 1-5, according to Mysteel’s latest weekly survey. The sustained high prices of the semis had crimped the re-rollers’ profitability, with some facing the reality of losing money, one survey respondent said.
Last week, prices of Q235 150mm square billet in Tangshan increased by another Yuan 40/MT (USD 5.7/MT) on week to Yuan 3,320/MT EXW and including the 13% VAT as of June 5, still at a five-month high despite softening by Yuan 10/MT from Yuan 3,330/MT the previous Thursday.
“Profits of Tangshan steel re-rollers were constricted by the procurement costs of the billets. Most of the producers are hovering at breakeven point, with some even making losses,” said a Tangshan-based industry watcher. “Activity among the rollers is low, and many are only producing the volumes required to fulfil the orders,” she told Mysteel Global.
Capacity utilization among the 59 section steel re-rollers that Mysteel regularly canvasses was 56.5% as of June 4, down by a sizeable 2.3 percentage points on week. Tangshan-based sources warned that in the days since the survey was conducted, the utilization rate may have declined further, due to the enforced suspension of some steel-related operations by the Tangshan government amid deteriorating air quality recently.
Following the production curbs order issued by Tangshan city government at the start of this month (and reported by Mysteel Global), the government has issued another order to “strengthen controls over June 6-9” as local air-quality conditions are deteriorating. The order, which included restrictions on sintering capacities at integrated steel mills and production bans at steel re-rollers, was soon extended to noon of June 13, Mysteel Global understands.
“Now, with the meagre profits or even losses being made, re-rollers seem more cooperative in complying with government orders to suspend production,” one of the sources observed, saying that since June 7 local re-rollers have gradually begun stopping production.
Billet stocks at the 53 Tangshan re-rollers Mysteel tracks weekly reversed up again by 42,600 MT or 10.9% on week to 434,800 MT as of June 4, after dipping briefly over the prior week, the latest survey showed.
But semis’ inventories at 14 Tangshan trading houses Mysteel monitors continued to decline for a thirteenth week, falling by another 37,600 MT or 13.3% on week to 240,400 MT as of June 4, a new low since mid-January, according to Mysteel’s data.
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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