This report is part of the S&P Global Platts Metals Trade Review series, where we dig through datasets and digest some of the key trends in iron ore, alumina, steel and scrap, and metallurgical coal. We also explore what the next few months could bring, from supply and demand shifts, to new arbitrages, and to quality spread fluctuations.
The prospects of steel billet making inroads into China could continue to look up in Q4, bolstered by state-mandated cuts to crude steel output and power consumption, while at the same time and for the same reasons, there will likely be a dearth of imported recycled steel.
Against this backdrop of output and power cuts, however, China's demand for billet will also be tempered by the direction iron ore prices take, even though in the case of recycled steel, higher scrap prices overseas will leave China struggling to make sellers look its way.
S&P Global Platts observed 142 spot CFR China billet deals, bids, offers and indicative price points in July, a jump from 86 in June, as iron ore prices hovered above the $200/mt mark. When clear signs as to the extent steelmakers had to cut production across various provinces emerged, billet became a more attractive alternative.
It is worth noting that most of China's billet imports are sold via traders to non-integrated rerolling mills, mainly in the eastern province of Jiangsu, when prices are economically more attractive than buying domestic. There has, therefore, been no large move by integrated steelmakers to replace lost crude steel output through importing billet.