Global View on Billet: Asian market posts rapid drop, MENA more stable with mood still bearish

The Asian billet market has been the most bearish this week due to the sharp fall in steel and raw material prices in China. This has impacted sentiments in the other markets, even though prices have posted only small changes in the MENA region and scrap prices have not settled yet.

The reference price for ex-China 3SP billet price slipped by $5/mt on Friday and by $20/mt over the past week, coming to $470-490/mt FOB. The lower end of the range ($470-480/mt FOB) reflects the tradable level, based on local prices, while the higher end represents offers. The official offers from China are the most competitive in Southeast Asia, but trade has fallen to almost zero as more mills have started maintenance works due to their negative margins, given their high-priced iron ore stocks. The city of Handan in China’s Hebei Province decided to initiate a level II emergency response as of six o’clock on the evening of March 13, which will lead to pig iron and steel production cuts by 30-50 percent, excluding these eight companies which have the lowest emissions.

Nevertheless, ASEAN region-based mills have not dropped their offers for billets, mostly as April shipment allocation has been sold out after the sales made last week. The ex-Indonesia official offer price for billets has remained at $515/mt FOB, and only for May shipment. The last deals from Dexin for billet have been heard at $510/mt FOB at the lowest, though the details and volumes of the sales could not be confirmed by the time of publication. Following the pause, ASEAN producers have accelerated slab trading, but only with a significant drop from the previous high offer prices. Also, a deal for 30,000 mt of ex-Vietnam BF 150 mm 5SP billet was done at $510-515/mt FOB last week to a trader.

Lower ex-China FOB prices have already been seen in Southeast Asia. In particular, an offer for ex-China 3SP billet has emerged at $510/mt CFR Indonesia, down by $8-10/mt from that seen on Tuesday and Wednesday. At the same time, offers for 5SP 150 mm billets to the Philippines are at $520-525/mt CFR, versus deals rumored in the previous week at $528-531/mt CFR. But offers from the ASEAN region have remained relatively high. The ex-Indonesia 130 mm 5SP billet price level to the Philippines has been reported at $530/mt CFR. Ex-ASEAN IF billet offers emerged at $520/mt CFR early this week, but no confirmed deals have been reported so far. The lack of 130 mm billet on offer from China has been the main reason why the reference price has declined by a moderate $7.5/mt over the past week.

The Turkish billet market has been rather sluggish this week, with both supply and the demand being on the low side. The number of inquiries from Turkey has been limited lately due to its sluggish long steel sales locally and abroad, while the number of offers particularly from the Black Sea region has also been limited. Being partially focused on the local market and also seeing low bids from Turkey, Russian sellers have preferred to sell to North Africa. The offers for April shipments stand this week at around $520/mt FOB, versus bids at $500-510/mt CFR, while prompt shipment cargoes have been offered at $540/mt CFR, versus buyers’ price idea of $530/mt CFR buyers in the Karabuk region. Sellers of Asian billet have been fishing at around $540-545/mt CFR, with no luck since most Turkish buyers are not in a position to book 30,000-50,000 mt billet cargoes at present. Some demand may exist for Algerian and Ukrainian 10,000-15,000 mt lots, which have been on offer this week at around $540/mt CFR. In the local Turkish market, no activity has been seen, but taking into account weaker longs prices, the uncertain import scrap market and low import billet availability, buyers believe $550-560/mt ex-works for billet should be achievable, versus $10/mt higher official indications from producers. As for export exports, there are inquiries from Morocco for around 20,000 mt, with the ex-Turkey billet indications evaluated at around $545-550/mt FOB.

The SteelOrbis reference price for ex-Russia Black Sea billet has settled at $495-515/mt FOB with the midpoint at $505/mt FOB, up by $6/mt on average from late last week. The lower end of the range still represents the weak bids from Turkey, while the levels at $510-515/mt FOB may be accepted in North Africa with some specific conditions. In particular, a few lots of 10,000 mt of ex-Russia billet for prompt shipment have changed hands at $517/mt FOB Black Sea and it has been heard that the material is for the Egyptian market. The high price is explained by the short lead time, while for April shipment the highest price possible has been assessed by market sources at $510/mt FOB. Also, inquiries for up to 30,000 mt from North Africa have been heard this week. The latest deal from a trader in the Egyptian market for an old position cargo has been done at $555/mt CFR Egypt. A recent sale for prompt shipment from Russia has also been assessed at near $550-555/mt on CFR basis. However, buyers are still bidding lower for April shipment, and a lot depends on the volume and grades. The tradable levels for April shipment are said to be at $540-545/mt CFR.

In Iran, some mills have become active in exports and a couple of new tenders for regular 30,000 mt lots have been floated this week. Except for the rumors about a $495/mt FOB transaction, which were not confirmed, there have been no actual deals reported this week. In the meantime, the expectations for workable prices have dropped significantly over the past two weeks given the global downturn, the decline in China, and the beginning of Ramadan, which traditionally slows down demand in the Middle East. While the most recent confirmed export deals were at $507-510/mt FOB from ESCO, new sales are expected to be closed at a maximum of $475-480/mt FOB. In the domestic market in Iran, according to sources, SKS has sold a total of 20,000 mt of 150 mm 3SP billet at IRR 21,450/kg and IRR 22,620/kg, with the official rate standing at IRR 42,000 to the US dollar.

Ex-India billet target prices are at $510-520/mt FOB, but sellers are not pushing sales overseas after receiving bids at $490-500/mt FOB. The competition with Chinese exporters, as well as with the flexible offers from Iran and Russia which are still present, has become tougher. The sources said that at least two sellers, a government mill and an Odisha-based private mill, are heard to have pulled back aggregate spot offers of 60,000 mt as deals fell through owing to the wide disparity between bids and offers.