The global economic downturn has hit the US semis market hard, in one-two punch: Sharp scrap decreases have left semis producers no foothold to maintain prices, and lack of demand in the end-use markets has diminished the appetite for billets and slabs.
Not so surprisingly, commercial activity in the US semis market remains very light with hardly any new spot purchases taking place.
US scrap prices have declined by approximately $355 /lt in October. This has opened the door for a large drop in billet prices, totaling approximately $250 /nt to $300 /nt ($276 /mt to $331 /mt or $12.50 cwt. to $15.00 cwt.) since our last report, issued September 16.
With such a quick adjustment, prices are all over the map; however, most spot offers for billets are between $415 and $450 /nt ($457 /mt and $496 /mt or $20.75 cwt. to $22.50 cwt.), though there are some offers hovering at around the level of $500 /nt ($551 /mt or $25.00 cwt.).
Scrap and end-product demand is still weak and market sources predict that billet prices will drop again in November. Still, lower prices are not expected to generate more business in this dismal market situation.
Even though there has been a large decrease, billets are domestically traded at a higher price than the international levels, which have also come down significantly. Ex-CIS 3 SP/5 SP billets are being offered for export at the price range of $270 /mt to $280 /mt FOB Black Sea for November/December shipments. These prices are down approximately $300 /mt when compared to a month ago. Meanwhile, Turkish mills’ offers for billet exports are at $370 /mt to $380 /mt FOB Turkey for November shipments, with discounts for large-tonnage purchases.
The total amount of US carbon billet tonnage exported in August was 16,635 mt, which is 3,606 mt more than the figure of 13,029 mt in July. The main export destinations of US billets during the period were: Dominican Republic, at 10,161 mt; Mexico, at 3,931 mt; and Taiwan, at 868 mt. Other countries that also received US billet exports include Brazil, Canada, and Germany. Exports are expected to decrease, however, as the US dollar is strengthening and the US prices are, once again, higher than the international prices.
The total amount of billets imported into the US in the third quarter was 90,474 mt. Steel Import Monitoring and Analysis System (SIMA) data show that during the third quarter of 2008, the US mainly imported billets from: Mexico, at at 35,087 mt; Canada, at 33,606 mt; and Brazil, at 16,659 mt. Japan, the United Kingdom and Switzerland also exported billets to the US during this period. Most of these imports are specialty billets, including high carbon and alloy grades for uncommon applications.
Similar to the billet market, worldwide slab demand is very soft and slab prices have come down tremendously. With the ongoing financial crisis, there are many doubts in the market, and some slab buyers cannot get the letters of credit from their bank that large import shipments require.
Sellers are offering from the usual sources such as Russia, Brazil, CIS and Western Europe, but there are hardly any sales being concluded. “No one talks about pricing in the market today,” a slab buyer told SteelOrbis. “Slab prices could be at the level of around $400 /mt FOB from everywhere, but this is a panicked market situation. Even if the prices are very low now, no one wants to buy. No one wants to take the risk.”
Most industry insiders believe that this slab market situation will last until the end of the year and possibly extend into the first quarter of 2009. And it is possible that slab prices could go down further to the range of $300 /mt to $350 /mt by the end of the year.
US flat rolled prices are also declining, on a weekly basis, and are unlikely to bottom out within the next four weeks. The weak end-use demand from flat rolled is a main factor causing slab prices to weaken.
The amount of slabs imported into the US in the third quarter was 1,177,313 mt. The largest quantities of import slabs arriving in the US during the third quarter of 2008 came from Ukraine, at 345,246 mt; Russia, at 236,158 mt; Mexico, at 167,513 mt; Canada, at 158,956 mt; Brazil, at 112,647 mt; and India, at 110,250 mt. Other smaller slab sources during this period included Japan, Australia, Germany, and Italy.