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

Liverpool, England — 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.

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"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-basedtrader said Tuesday.

Sources in the CIS billet supply chain have reported inquiries for100,000 mt or more from China.

This could be a hangover from the shuttering of induction furnaces, or aresult 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 andBrazilian mills fielding inquiries; a Brazilian mill said it was in talk overprices and volumes for second quarter arrival material.

European coil mills are talking of a shortage of hot rolled given the2+26 cities policy, which is reducing China's exports but also divertingmaterial from elsewhere that may have previously gone into the US or EU.

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

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

Turkish steel and raw material prices have risen quickly of late, withsources pointing to China's absence from export markets, and the likelihood ofit 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 alreadybrisk domestic demand, with price rises exacerbated by the weakening lira.

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

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

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

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

This has driven strong profitability and incentivized raw materialsprocurement when some thought iron ore and coal prices would be underpressure.

Since November 15, when the winter heating cuts officially began, ironore 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 reducedsupply and continued congestion off the key Australian loading hub ofDalrymple Bay Coal Terminal.

Premium low volatile coking coal prices have risen $30.50 sinceNovember 15, to $219.75/mt Monday, with mills in China and other marketsscouting 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 globalsentiment trying to catch up with a galloping Asian market.

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

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