Trader Cargill exits China domestic steel trading

International trader Cargill is exiting steel trading in the domestic Chinese market, according to a notice seen by Fastmarkets.

According to China metals trading lead, Oliver Handasyde Dick, Cargill is adjusting its structure according to market fundamentals and had ceased steel trading after a recent examination of its business model.

“However, this does not change Cargill’s position in China; we will continue to provide risk management solutions for our clients in China. For example, we continue to maintain a strong position in iron ore and will continue to provide Chinese steelmakers with pricing and supply chain solutions,” Dick said in a note the clients.

He also promised no changes to Cargill’s current contract obligations in China.

“The Chinese market is very tough to compete in,” an industry source in Southeast Asia told Fastmarkets.

Multiple trading companies have suspended their physical trading in the past couple of years, according to market participants.

“It’s been a big struggle for the ferrous industry chain, from steelmakers to downstream users, to make money in the recent two years. With traders in the middle of the chain, we are facing greater challenges in maintaining margins,” a Shanghai-based trader, who handles spot steel trading in China, told Fastmarkets.

China’s ferrous metal smelting and rolling processing industry recorded a total loss of 22.22 billion yuan ($3.07 billion) in the first four months of 2024, according to data from National Bureau of Statistics (NBS).

Meanwhile, Cargill’s exit from Chinese domestic steel trading is not expected to have any effect on the overall market in terms of prices, supply or demand, a second steel trader in Shanghai said.

With demand seasonally slowing and cost supports softening in anticipation of peaking hot metal production, Chinese steel prices have moved lower in the past two weeks.

Fastmarkets’ price assessment for steel hot-rolled coil domestic, ex-whs Eastern China (Shanghai) was 3,780-3,800 yuan ($522-525) per tonne on Tuesday. This is its lowest level in about eight weeks.

On the same day, Fastmarkets’ daily price assessment for steel reinforcing bar (rebar) domestic, ex-whs Eastern China was 3,500-3,520 yuan ($483-487) per tonne, marking the lowest level in three weeks.

Jessica Zong in Shanghai contributed to this article.

Published by: Zihuan PanPaul Lim