Asian mills cautious over rising Chinese steel exports in the region
Asian mills are cautious over the recent spike in steel exports from China to the region as the coronavirus outbreak has dampened the domestic Chinese demand, regional mill and trading sources told S&P Global Platts.
“The pie is limited, and it does not help if there are more mouths to feed,” a South Korean trader said, “Even if this is just for a short term, it is still damaging to the market as it comes at a time when steel demand in already in the ditch.”
Particularly some 160,000 mt of deals for bars were heard sold to Singapore, Hong Kong, and South Korea within the past 10 days. In comparison, China only exported 30,000 mt of bars in January.
Chinese billet too were heard actively offered this week into Southeast Asia, competitively priced at levels of $410-$415/mt CFR. Russian and Ukraine origin offers meanwhile, were less competitive at $425-$430/mt CFR, while offers from Turkey totally fell off any interest from buyers as FOB prices were already at $435/mt. Iranian origin billet still remained the most competitive at $415-$420/mt CFR, however, noting that the US sanctions against Iranian steel was still active, Platts noted.
Though even with better priced billet offers, regional buyers were still holding caution on purchasing Chinese billet without a clearer short to mid-term outlook.
“If domestic prices in China rebounds, there is still a fear that sellers will not honor the export contract,” a regional trader said, citing similar cases which affected traders back in 2017, when domestic steel prices shot up within the country and caused non-fulfilment of export contracts.
Doubts too cascaded down to regional scrap needs, as mills production planning became “clouded” for the short-to-mid-term outlook on steel.
“We have to monitor the situation closely, our own economy and demand might be hit by the virus as well, on top of the possibility of Chinese steel flowing in,” a South Korea EAF mill source said, reflecting their reserved stance this week on scrap procuring, and echoing concerns too across mills and traders in Japan, Taiwan, Vietnam, and Indonesia.
Within China, domestic prices for Tangshan billet ex-stock has fallen 9% since the Lunar New Year to $428/mt, or down $43/mt in a month. But as the Chinese domestic market started returning this week, signs of improvement to domestic demand might begin to pick up.
“Chinese mills are monitoring the situation as well, they wouldn’t offload everything to the export market yet as prices domestically were still higher,” a Chinese trader said. “Once demand picks up in China, mills will still find it more profitable to sell within.”