About one hour before our newsletter was to be sent out on Tuesday evening SMU got a call from one of our close contacts/sources in Asia. We had asked him a question about the Chinese market earlier in the day (overnight for him) and he decided that so much was happening in China that an email was not good enough so he called SMU on Tuesday evening (Wednesday morning in Asia). This contact is a trading source who handles all kinds of products out of and into China from iron ore, scrap, flat rolled, billets, rebar (they call it debar), etc.
First, he reminded us that the Chinese authorities have closed 100-120 million tons of EAF and induction furnaces that did not meet the Chinese equivalent of the EPA emissions standards. He told us, "John, there is a big development as China is now exporting scrap. This has never been done before." He told us the scrap being sold was bundles and the price is $200/MT FOB Southern China. The scrap was being offered in 15,000-20,000 metric ton lots and is being exported to Hong Kong, Thailand and Egypt. The price includes the Chinese government taxes that have to be paid domestically. He told me to expect the exports to continue for 6 to 8 months. He explained that a number of the furnaces that were shut down were being upgraded and would return to operation. Even so, he thought that would only be 20 percent of the 110-120 million tons that was shut down.
Chinese cold rolled is being offered to Canada as aluminum killed re-rolling quality 1008 max carbon .023" X 48" at $490 FOB China with freight to Canada at $57/metric ton.
Hot rolled sales out of China are now very limited due to dumping suits around the world. He told SMU HRC was sold to the Middle East and to Africa below $400 per metric ton for 2.3mm in width of 1200-1500mm FOB China.
Scrap dealers in the United States need to be aware that billets are being sold at $387/MT FOB China for ASTM A615/706 Grade 60 .04% Vanadium. The billets are going to the Middle East and SE Asia. Grade 40 ASTM 615 numbers are $375 FOB China.
Debars (rebar) and wire rod including 5.5mm are being sold at $400/MT FOB China.
The big iron ore companies in Australia and Brazil have large bonded warehouses in Northern China where they unload their ore and then sell it out of the warehouses. The companies are slowing down shipments to China because the warehouses are full with current inventories of approximately 125-130 million metric tons. The steel mills are buying only what they need now (as opposed to having to buy full shiploads). My source, and the ore companies he represents, expect 62% Fe fines to drop into the high $40's or low $50's. Right now they are around $64/dmt - down $30/dmt from the peak just a short time ago.
He also told me the Chinese banks are cracking down on the steel mills and their debt. The banks are not allowing the mills to continue to run their books in the "red" (at a loss). Also, they can't roll-over bad bonds anymore. China is becoming "regulated."
When asked about business conditions in China he told us, "Business is s_ _ t, it is terrible."