Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Chinese finished steel exporters are struggling to receive orders as global demand remains hampered due to lockdowns in many countries, particularly in Southeast Asia. Steel production in China has picked up to pre COVID-19 outbreak levels. But production suspensions announced for steel downstream industries to contain the spread of the virus has posed a demand challenge.

The purchasing managers’ index (PMI) for China’s manufacturing sector expanded to 52 in March from 35.7 in February according to the National Bureau of Statistics. This expansion is said to be driven by a recovery in manufacturing by China’s large and medium-sized enterprises. But sources say steel downstream production could not have reached the pre-outbreak levels.

A drop in new export order index

The country’s new export order index decreased to 29.30 points in February, from 51.40 points in January, the steepest drop since 2008, as per the government data. In March, though the index recovered to 52 points for exports of all products, finished steel failed to find buyers in overseas markets. A few contracts from importers in East and Southeast Asia have already been cancelled, with a likelihood of more cancellations as logistical chains remain disrupted due to lockdowns and closure of boundaries.

China billet imports 

China steelmakers have placed orders for billets in an open arbitrage window. A Vietnamese steel mill offered 40,000mt billet cargo at $380/mt fob Vietnam or $390/mt cfr China. The deal concluded at $380/mt cfr China for immediate shipment, down by $15-20/mt from the prior week. A few billet trades were at $375/mt cfr China for May shipments. 

Indian steelmakers eye destocking inventories 

With many major global steel markets grappling to control the spread of COVID-19, China seems to be the only active buyer. Indian steelmaker, Vizag steel is heard to have sold 30,000mt of billets for May shipment at $355-356/mt fob India or $375-376/mt cfr China.

Vietnam goes into lockdown 

The Vietnamese health ministry had announced a lockdown till April 15. The country is a net exporter of finished steel and the shutdown of non-essential activities in Vietnam has added to the woes of the global steel industry. With the lockdown, movement at Ho Chi Minh port is likely to be disrupted, according to Davis Index source.

Finish steel prices tumble on lack of demand 

Chinese mills offered HRC at $420-425/mt fob China, however, failed to find buyers as traders preferred lower-priced Indian-origin HRC at $395/mt cfr Vietnam, according to sources in Vietnam. Global HRC prices have dropped by over $50-60/mt in last two weeks. Indian mills are looking to liquidate their inventories at lower prices as domestic steel demand is unlikely to recover before August.

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