China may resume steel billet imports after the New Year holidays (11-18 Feb ‘21), if global prices continue to remain at current levels. Also, expected pick-up in seasonal demand and prices post-holiday may lead to increased imports, SteelMint learned from market participants.
Just before the holidays, China reportedly booked a couple of billet cargoes from Russia and Indonesia. The Russian cargo was booked at around $525/t CFR China (125mm), whereas an Indonesian cargo (150mm) reported being booked at $540/t CFR levels (ASEAN countries enjoy an exemption of 2.5% in import duty due to preferential trade agreement with China).
Maths behind the imports
The current ex-works price for billet in the key import market of China (Jiangsu province) is at around RMB 4000 /t ($622/t) including 13% VAT. Current billet import offers are around $540-545/t CFR China which is equivalent to around RMB 3970/t including 13% value-added tax and domestic transport. Most of the participants believe, Chinese domestic steel prices may pick up post-holidays and may open some room for imports.
“The mills in Tangshan have fixed the billet prices at RMB 3850/t, exw including 13% VAT, till 17 Feb ’21. At the current cost structure, the mills are incurring losses up to RMB 200/t. Post-holidays the domestic prices are likely to rise.” a trader told SteelMint. According to SteelMint analysis, the billet bookings may not happen immediately after the holidays. However, we expect a decent number of bookings by end-Feb/early Mar ’21.
During CY ’20, billet imports in China stood at 17.35 mn t, up six-fold y-o-y. Russia, Vietnam, India, and Iran were the predominant suppliers during CY ’20.
Japanese scrap export prices look to have bottomed out
After a continuous price drop during the last month, Japanese scrap export offers rose considerably during the past week. Increasing domestic demand in Japan led to a hike in scrap export prices. Prices have rebounded after few scrap traders started limiting their shipment amount resulting in the demand-supply mismatch. Most suppliers are waiting for the outcome of Japan’s monthly Kanto scrap export tender, scheduled on 10 Feb ’21.
SteelMint’s price assessment for Japanese H2 scrap export stood at JPY 37,500/t FoB ($356/t), registering a hike of JPY 1,500/t ($14) w-o-w.
Chinese mills have been actively booking Japanese scrap after their restriction on scrap imports lifted. Hence, an increase in imported scrap offers in China is likely to keep billet prices supported in the near term. Also, marketers believe that global prices are at rock bottom hence further drop is not expected.
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