Steel billet prices in China’s major steel hub, Tangshan, fell by over RMB 1,000/tonne (t) ($148/t) since early April 2022 due to weak domestic demand and a sudden surge in COVID-19 cases following which markets had to be shut down, logistics and transportation chains were disrupted and production was directly affected.
Prices stood at around RMB 3,650/t ($542/t) on 13 July, a sharp fall of around RMB 1,210 ($180/t) from the high levels of RMB 4,860/t ($722/t) seen in the first week of April. Notably, prices have hit the lowest level in over one-and-a-half years, data maintained with SteelMint shows.
Factors weighing down billet prices:
- Rising inventories on improved supply: Domestic steel billet prices have been declining mainly due to healthy output by mills amidst lower demand in the market leading to rising inventories. Throughout the second quarter of 2022, the average supply of steel billets in the Tangshan market increased compared with the same period last year. Meanwhile, as of 13 July, the total inventory of billets rose to 962,400 t, an increase of around 580,000 t y-o-y.
- Bearish market sentiments: In Q2CY’22, demand for billets failed to materialise as per expectations followed by mills suffering losses due to heavy rains and production restrictions because of the pandemic. Meanwhile, buyers have adopted a wait-and-watch policy owing to uncertain market conditions and are not willing to stockpile.
Outlook
Amid ongoing production curbs by steel mills and weak demand in the domestic market, steel billet prices are expected to exhibit volatility in the near term.
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