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China looking to import 'Black Swan' event for global steel market

Liverpool, England (Platts)--5 Dec 2017 245 pm EST/1945 GMT


China's attempts to import semi-finished steels could be a "Black Swan" event for a steel market that is already on a significant bull run.

"China has gone to multiple sources to bid and can't get offers -- freight inquiries everywhere for flows to China but nothing firm," a US-based trader said Tuesday.

Sources in the CIS billet supply chain have reported inquiries for 100,000 mt or more from China.

This could be a hangover from the shuttering of induction furnaces, or a result of the well publicized heating season cuts.

It is subject to prices working at a time of rising freight costs.

Nevertheless, it looks bullish for the whole ferrous metals complex.

China is also, unbelievably, scouting for imported slab, with CIS and Brazilian mills fielding inquiries; a Brazilian mill said it was in talk over prices and volumes for second quarter arrival material.

European coil mills are talking of a shortage of hot rolled given the 2+26 cities policy, which is reducing China's exports but also diverting material from elsewhere that may have previously gone into the US or EU.

One European mill suspended offers Tuesday given the stronger market fundamentals, while others were mulling increases for the first quarter.

Far from being the depressor of the global steel markets as was often said in recent years, China is now driving an upturn.

Turkish steel and raw material prices have risen quickly of late, with sources pointing to China's absence from export markets, and the likelihood of it importing, as the primary factor.

Scrap import prices rose $45/mt between November 13 and December 5, to $346/mt CFR.

This is filtering into stronger rebar export offers at a time of already brisk domestic demand, with price rises exacerbated by the weakening lira.

Turkish export prices are up $25 since November 15, at $540/mt FOB as of Tuesday.

There is a shortage of some grades in Turkey, which is also contributing to the upside.

While some feel the bull-run may have gone too fast and too far, it is underpinned by fundamentals.

Stock levels in the world's largest producer have hit multi-year lows and demand has surprised to the upside against the 2+26 cities cuts.

This has driven strong profitability and incentivized raw materials procurement when some thought iron ore and coal prices would be under pressure.

Since November 15, when the winter heating cuts officially began, iron ore has risen over $10/dry mt to $72.40/dmt CFR North China as of December 4.

Coking coal increases have been even more meteoric on fears of reduced supply and continued congestion off the key Australian loading hub of Dalrymple Bay Coal Terminal.

Premium low volatile coking coal prices have risen $30.50 since November 15, to $219.75/mt Monday, with mills in China and other markets scouting hard for cargoes in an absence of January loadings.

These raw material increases, though likely led by steel, are "justification" for the increases being sought by mills at a time of global sentiment trying to catch up with a galloping Asian market.

--Colin Richardson, colin.richardson@spglobal.com

--Edited by Jonathan Dart, jonathan.dart@spglobal.com




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