Billet inventories at traders in Tangshan; China’s largest steel producing hub in North China’s Hebei province, reached a new low last week. Even though the stocks total only edged down another 1,300 MT or 0.1% on week to 128,300 MT as of December 5, Mysteel’s latest survey showed. Nonetheless, this was the lowest since Apr’12 when Mysteel first launched the survey.
The survey covers a sample of 14 trading houses in Tangshan including those at the two ports of Caofeidian and Jingtang. Billet stocks at these warehouses have declined for four weeks in a row, Mysteel Global noted.
The further decline in billet stocks at traders, however, was mainly due to the fact that some of the billets stored at the ports were shipped southwards to East and South China, while buying among local steel re-rollers from the billet traders was weak, market sources in Tangshan indicated.
“Only the port inventories declined; actually, stocks at retail warehouses increased,” a member from the survey team observed.
“(Tangshan) steel re-rollers preferred to buy directly from the steel mills and they were not much interested in purchasing from the trading houses, due to the latter’s higher offers,” one of the Tangshan-based market sources verified.
For example, the Q235 150mm square billet benchmark price in Tangshan stood at Yuan 3,450/MT (USD 490.8/MT) EXW and including the 13% VAT as of December – equivalent to Yuan 3,510/MT on delivery – but the same billets from traders were priced much higher at Yuan 3,550-3,560/MT the same day.
“Only those (re-rollers) with immediate delivery needs had to purchase from the traders,” he said.
As of December 5, billet stocks at 33 steel re-rollers in Tangshan that Mysteel regularly canvasses also decreased by 19,600 MT or almost 1% from the prior survey period to 201,400 MT.
Low billet inventories will continue to support billet prices. However, steel re-rollers’ negative margins and their high stocks of finished steel may undermine their keenness for producing, thus pressuring the billet price, another Tangshan market watcher maintained.
During the week to December 6, the twelve Tangshan angle re-rollers under Mysteel’s weekly survey were actually losing Yuan 10 for every tonne they rolled, according to Mysteel’s calculation, though this was an improvement on the Yuan 40/t they were losing the prior week.
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