Indian induction-based mills, especially from central and eastern India, have become very active of late, in the export markets. SteelMint understands that there are a few reasons for their interest in overseas sales. One is the tepid demand in the domestic market at present, induced by the Covid lockdown in various states, which is impacting construction activity. Secondly, with oxygen diversion for medical purposes, most IFs are now operating at 40-50% capacity. Thirdly, and importantly, Chinese rebar futures are rising to record levels on a daily basis at this juncture due to the onset of the construction season in China from mid-April onwards and which will probably sustain till mid-August. These futures are influencing global billets prices. Fourth, the Chinese government has reduced the import duty on billets from 2% to nil, fuelling speculations that there could be good volumes of imports from India in the near term.
China, the price influencer
China is the bulk buyer of billets globally and therefore a huge influencer of prices. The global billets market mimics the Chinese rebar futures index. Since the Chinese futures are climbing up, the Indian IFs see a huge opportunity to cash in on this bullish market with their semis. As per SteelMint’s data, the Shanghai Futures Exchange (SHFE) rebar prices have been rising from 5,371 RMB/tonne (t) on 26 Apr’21, with the growth gaining momentum from 6 May’21 in particular. From 5,391 RMB/t on 30 April 5 May’21, the prices climbed to 5,665 RMB/t the next day to reach a record high of 6,171 RMB/t on 12 May’21.
Following the hike in futures, the domestic billet prices in China registered a rise of RMB 670/t ($100/t), and today settled at RMB 5,670/t ($877/t) ex-Tangshan including 13% VAT.
BF-grade billet import offers to China have been at around $700/tonne CFR which subsequently climbed $720/tonne and then to a record $750-760/t on 10 May’21. “Buyers would prefer to wait instead of making deals now,” said a source.
Seizing the overall opportunity, a central India-based mill concluded a deal last week and is currently in the market to conclude another parcel of billets and wire rods this week.
One IF based steel maker said it expects $710/t CFR but the Chinese starting price for BF grade billets is $770-780/t CFR
Specifications the spoiler?
However, despite the surge in export deals, there is no clarity on whether the consignments are headed for China. One reason is that China buys billets with a phosphorus content of less than 0.05% (a global benchmark). “China may not buy billets that don’t match this specification. Indian scrap- or sponge-based IFs’ products are generally above 0.05%,” said a market source.
Keeping the specs in mind, China is a habitual and bulk buyer from mainstream supplier countries like Russia, Ukraine etc. Philippines buy billets from Russia too but with China buying at higher prices, it may perhaps have no option but to buy from India to get the price benefit, consequently opening up wider opportunities for the IFs.
However, with the futures market rising consistently in China, the Indian IFs may want to export to China, as per market sources, for which they must improve their billets’ chemistry. Consequently, they will need to invest in higher grades of raw material which may lead to a sharp short-term rise in demand for the same.
Leave a Reply