ASEAN
import markets for billet and hot rolled coil continued to see offer prices
fall rapidly in the past week, Kallanish notes.
Prices for Chinese billet and HRC appear to be racing each other as they
spiralled down to the $500/tonne cfr Southeast Asia level on Friday. These
offers are below the back-to-back quotes and production costs of Chinese mills.
Regional trading sources blame the aggressive pricing on traders
short-selling, in anticipation of prices coming down when they need to ship the
steel out. “They are shorting the market with expectations of further
depreciation of the CNY,” a Hong Kong trader says. “Demand for steel in the
winter will weaken.” While it is hard to predict when steel prices will find
support, he thinks prices will stabilise slightly, after more export orders are
concluded.
Certain exporters who are offering billet at below the
current market price are offering open origins, of either Chinese or ASEAN
material, a Chinese trader says. "When they need to ship, they hopefully
can find the cargo from ASEAN mills. Or else, they ship Chinese billet without
paying the VAT," he adds.
Chinese HRC has been falling noticeably quicker than billet and
wire rod in the region. Traders pressing down the market by frequently
offering at ever-lower prices and depressed demand in Vietnam are some of the
main factors for this.
The Vietnamese steel market has been suffering from tightened
credit and poor demand. Property fraud scandals have caused Vietnamese
authorities to scrutinise and impose strict credit restrictions on the real
estate sector and these, in turn, have quelled construction activity in the
country.
Meanwhile, billet prices in the region have started to tumble
quicker. However, most Chinese billet export offers are typically for
150mm 3sp grade, so the slide in the market could be less quick. “There
are maybe maximum three buyers that can buy this size in 3sp grade,” a Manila
trader says. “But there’s a psychological impact on prices even on other
origins and products.” Another Manila trader observes: “The more they [traders]
lower the price, the more the fear that further price decreases are imminent.”