Steel billet imports into China increased by 29% year-on-year to 3.76 million tonnes (mn t) in Jan-May’21 as compared to 2.92 mn t in the corresponding period last year (CPLY), SteelMint’s customs data reveals. The Chinese government sought to facilitate imports of semi-finished steel to feed domestic demand amidst supply crunch as it stepped up production control measures with an eye on reducing pollution and achieving its annual crude steel production target of less than 1 billion tonnes in CY’21.
Billet imports in May’21 stood at 1.03 mn t, up 37% m-o-m compared to 0.75 mn t in Apr’21 on increased supply from Iran and Oman as well as active Chinese restocking ahead of the monsoon. On a yearly basis, imports increased by 34% compared to 0.77 mn t in May’20.
Vietnam, Indonesia leading exporters
Vietnam supplied the highest volume of billets to China at 1.11 mn t during Jan-May’21. The country retained its top exporter position with a 73% y-o-y increase compared to 0.64 mn t in Jan-May’20.
Indonesia jumped to the second position in top exporters’ list with 0.61 mn t followed by Iran with 0.54 mn t. Exports from Indonesia saw a massive 299% increase in Jan-May’21 while those from Iran were up by 44% y-o-y due to easing of government restrictions on steel slabs and billets exports.
China’s billet imports from India amounted to 0.23 mn t, an increase by 44% compared to 0.16 mn t in CPLY. Imports in Jan’21 were recorded at 45,008 t, which decreased by 34% m-o-m in Feb’21. However, the same picked up in the later months due to strong demand from China amidst production curbs.
Stricter output curbs, higher prices boost imports
The local authorities in Hebei province, China tightened production cuts in major steel hubs, including Tangshan, in late-Apr’21 (which continued throughout May’21), leading to supply shortage and higher prices of steel, including billets. This increased the country’s dependence on imports as the steelmakers found this to be a more viable option rather than buying domestically.
Chinese mills remained active in booking imported billets in the past few months due to continuous rise in domestic prices. The country’s billet prices kept on increasing following an uptrend in global steel prices and bullish steel futures.
Rebar prices too remained buoyant during the month on firm demand amidst construction season and soaring futures. The most-active contract for Oct’21 delivery on the Shanghai Futures Exchange (SHFE) hit its highest record at RMB 6,171/tonne on 12 May’21 since it started trading.
Removal of import duty
China removed the import duty on non-ASEAN-origin billets to zero from the earlier 2.5% with effect from 1 May’21. The Chinese Customs Tariff Commission of the State Council issued a notice on 28 Apr’21 which said, “it is done to guarantee domestic steel supply and promote the development of the steel industry”. Removal of import tariffs played a key role in boosting exports from these nations.
Outlook
The near-term outlook remains bullish as the Chinese steelmakers are busy in restocking ahead of the monsoon. Furthermore, the country is likely to face a supply crunch in the coming months on expectations of further steel output cuts on a wider scale in the latter half of the year. This will boost China’s billet imports as prices in the domestic market will rise consequently, SteelMint notes.
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