Iron ore futures came to a standstill following holidays season in China, despite gains in steel billet prices.
Tangshan billet prices then rose by RMB 30 on-day to RMB 5,040/mt on Tuesday, May 4 after billet prices stabilized under the RMB 5,000/mt level since end-April.
Billet margins soar to record high level
Chinese billet margins rose to multi-years high around RMB 1,200/mt in April, according to ArgusMedia.
The high steel margins resulted the Tangshan billet prices to push for record-high levels over RMB 5,000/mt level by early May, amid steel output restriction and high construction steel demand season.
Due to robust steel demand, there was also rising billets imports from other Chinese provinces like Shandong and Jiangsu to converge in Tangshan.
Furthermore, there were also billet imports from other steel-making countries such as Malaysia, Indonesia, Vietnam, India, and Russia since the second half of March 2021.
More billet price upticks after removal of import taxes
Chinese authority had stepped up to reduce steel production to comply with stricter carbon emission regulation by removal import taxes for semi-finished steel such as billets starting from May 1.
This policy caused a price uptick in billet prices as many Asian buyers rushed into purchasing for billets before most of the Chinese participants began to import the semi-finished products.
Moreover, the Chinese authority also announced the abolition of export rebates of 13% on VAT for steel exports. As the Beijing policymakers wanted more Chinese steel producers to focus on the domestic market instead of producing more steel products for the export market.