05/09/2017
Steel futures have surged on Friday due to news about fire at Bengang’s blast furnace, which is known as one of the biggest in Asia. The accident is likely to tighten HRC supply sharply, as other steel mills will be inspected in the near future and a series of maintenance works ahead of schedule are expected in September.
On Friday morning, September 1, BF No.1 at Bengang Steel (which belongs to Benxi Iron and Steel) has caught fire, but the reasons have not been disclosed yet. The full consequences are not very clear now either. “Some news came in of the Cowper stoves catching fire. If it is true, 30 days will be ok to finish repair, but if the hearth burnt through, it may take at least one year,” an engineer at another major Chinese steel plant told Metal Expert.
The capacity of that 4,747 cu m BF is 3.79 million tpy, so the expected impact on pig iron production exactly at Bengang is at around 10,000 t per day or 150,000 t of HRC per month, market sources estimate. However, the total supply cut may become much more substantial, as most steelmakers will be inspected in September. “Because of Bengang case our mill and many others will be examined,” a representative of a major private steelmaker in Shandong province told Metal Expert. He also noted that many mills will have to suspend production for maintenance, even if it is not planned for this year.
The accident has become the major reason for steel futures jump on Friday. The most traded HRC and rebar quotes have surged by RMB 179/t ($27/t) and RMB 135/t ($20/t) from Thursday. However, no increase in the spot local and export markets of HRC is seen yet. Most steelmakers have stopped offering, expecting price increase next week. “We do not offer now, as next week prices may become much higher,” a Rizhao Steel representative said. Buyers also prefer to wait and see at the moment. “Let's see next week. Nobody will accept the price level in Vietnam until they understand the real effect,” a Vietnamese importer commented to Metal Expert.
Most market insiders expect sharp price increase in the near future, as the accident has been actively discussed on Friday not only in China, but warnings have come from many other countries and regions. However, “news is largely closed now inside China and government will try to open minimum information about this case in future, as they do not want sharp rise in futures market,” a major Chinese trader said. Today many of Chinese media sources have reported production will return to normal soon, as the company has all spare parts.
