The reappearance of Chinese billet caused a stir in Southeast Asia last week, Kallanish notes. Like before, the latest Chinese billet offers are the most competitive in the market and, if supply is prolonged, could bring down prices even quicker.

Offers of Chinese billet for November/December shipment were heard at $520-530/tonne cfr Philippines during the last two days of the week, trading sources say. Several traders heard that a cargo of blast furnace 150mm 5sp grade billet was ordered on Friday at $520/t cfr. But others are unaware of this deal taking place.

Some traders say these sellers are offering at too-low prices because they will not pay the full Chinese VAT on the exports. “The offers really shocked me because it is crazy that they dare to take the risk,” a Chinese trader says. “It is legal to export billet but it is illegal to not pay the full VAT,” he adds. Unlike in the past, the billet will not be declared as alloy square bar, he points out. “The non-payment of the full VAT can apply to any steel product, not only for billet,” he adds. 

A regional trader observes: “There are many risks involved.” He would have thought that Chinese exporters would partake in such deals only if there are sufficient gains. Chinese billet offers are also available in Indonesia, local market sources report. A Jakarta mill manager heard 1sp grade billet from China sold at $515/t cfr Indonesia. He was told the seller of the speculative trade is using Chinese futures to hedge.

The Manila market saw regional billet prices slip over the past week. The regional market was quiet as the Chinese Communist Party (CCP) congress did not provide any boost to the Chinese economy or steel market.

Offers for blast furnace 120/130/150mm 5sp grade billet from Malaysia, Indonesia and Vietnam for November/December shipment are prevailing at $525-535/t cfr Manila, inform trading sources. An Indonesian mill is offering December-shipment 130mm 3sp billet at $525/t cfr and 5sp at $530/t cfr. Offers for 130mm 5sp blast furnace regional billet were at $535-545/t on 14 October.

Kallanish assessed 5sp/ps or Q275 120/125/130mm square billet at $520-525/t cfr Manila, down $10 on week.

Chinese billet will continue to flow into the region unless there are changes to foreign exchange rates and iron ore prices, or positive news to conclude the CCP meeting, a regional trader said on Friday.