Chinese Billet Prices Drop 18-Months Low, Can it Flood the Global Market?

Chinese billet prices corrected by around Yuan 800/MT ( USD 115) in last one month making it to hit 18 months low.

Spot billet prices continue to drop in Chinese domestic market on bearish sentiments and de-stocking by traders. Price for 150mm Q235 grade billet assessed at Yuan 3120/MT (Ex-Tangshan-China, Including 17% VAT) which is equivalent to USD 450/MT.

Market participants expect a possibility of Chinese billets getting back in export market. Some traders heard offering 150mm Q235 grade billet at around USD 4500/MT FOB China levels.

Can China Flood the Market with Low Cost Billet?

In our recent visit to steel mills in China, we learned that not many traders and mills are willing to export billets declaring it as alloy square bar and claiming a rebate of 13% on exports. This is due to tight check by China custom officials.

It is to be noted that Chinese government offers a tax rebate of 13% and VAT refund on exports of alloy square bars or value added steel where as commercial billets attract an export tax of 15% and no refund of VAT.

This means, if a mill wants to export billet as commercial billet, export price would be around USD 520/MT FOB China, however if he exports it as square bars (or value added steel) export price will be around USD 450/MT FOB China.

In 2015 Chinese billet exporters have been taking advantage of this tax rebate to export billets in the name of alloy square bar by adding a small percentage of chromium.