Global View on Billet: China-driven bearishness persists despite some small hike attempts

The situation in the global billet market has remained weak this week, since despite previous expectations, sentiments in China have remained bearish and no firm stimulus signals have been announced after the third plenum of the Chinese Communist Party which finished on Thursday. Though suppliers in some destinations like the local Turkish market and traders have been trying to increase offers or at least keep them stable, their success has been limited.

The ex-China billet reference price stands at $470-475/mt FOB, down by $2.5/mt on average over the past week. Offers have been stable for most of the week as sources were waiting for some supportive announcements from the party meeting. But since no news was heard, by Friday price slipped slightly. One mill said that the lowest possible price from a seller would be at $465/mt FOB for 3SP 150 mm billet when rebar futures prices resume their decline. As reported earlier, traders managed to sell sizable volumes of up to 300,000 mt of Chinese billets to different markets last week, mainly in short positions. 

ASEAN billet producers have been facing difficulties keeping offers at previous levels as sentiments in China have weakened despite previous expectations. A contract for 40,000 mt of ex-Vietnam billet was done at $472-475/mt FOB for end-of-August shipment, according to a number of sources. This material will be partly to cover previous short positions and partly for a long position. Also, offers of ex-Indonesia billet have been at $480/mt FOB, down by $5/mt from those heard early this week, and some traders said that the producer is inviting bids at $475/mt FOB.

At the same time, a small increase in billet offer prices in the import market in Southeast Asia has been recorded this week amid the absence of very aggressive prices for Chinese origin material. However, the market has been on pause as buyers doubt the sustainability of the latest price changes. Offers for 5SP billet from traders to the Philippines have been at $495-500/mt CFR, versus most offers and deals at $489-495/mt CFR Manila last week. 3SP billet was available in Indonesia and Thailand at $490/mt CFR and above, while last week negotiations for this grade were at $486-487/mt CFR. Nevertheless, by the end of this week, market sources said that deals are discussed for Chinese origin at below $490/mt CFR again for 3SP and at $490-495/mt CFR for 5SP.

Billet prices in the Turkish domestic market have increased over the past week, even though there is little support from import scrap and rebar business activity. Integrated producer Kardemir has raised its price by $5/mt since its previous sales to $545-555/mt ex-works depending on the steel grade and, according to sources, it has traded around 28,000 mt. In the Izmir and Iskenderun regions, the local billet prices are mainly at $550-555/mt ex-works and above with small lots being sold.

Having restocked with Kardemir’s billet, Karabuk region-based buyers have also booked from the import segment. In particular, ex-Belarus material has been sold at $513/mt CFR, while ex-Donbass material has been sold in small lots at $505/mt or $508/mt CFR, market players say. In addition, two buyers in the same region and one customer from the Marmara region are reported to have booked a total of 25,000-30,000 mt of billet from Russia at $515/mt CFR, which translates to around $490-495/mt FOB Black Sea. Some sources assume that the latest mentioned price is somewhat on the high side as the cargo is for a relatively short lead time. As a result, the SteelOrbis daily reference price for ex-Russia square billet has remained stable over the past week at $485-495/mt FOB Black Sea.

Aside from trades concluded with ex-Black Sea suppliers, there have been offers from Asia at $515/mt CFR ex-China and at $520/mt CFR and higher for ex-Indonesia and ex-Malaysia cargoes. No fresh deals have been reported since Turkish mills largely restocked with good volumes previously. The most recent ex-China deals for 50,000 mt lots were closed in the past couple of weeks at $510/mt CFR Izmir and $517/mt CFR Marmara (for mixed grades).

Iranian export billet prices have remained stable over the week but indicative since barely any trade has been detected. No fresh export tenders have been announced by the Iranian mills since the supply is still limited due to electricity issues in the country. While the households’ consumption has been rising traditionally in the summer period, the supply of the industries has been significantly ct, resulting in a serious decline of the steel capacity utilization rates. According to sources, from 50 to 70 percent of crude steel production is currently on hold in Iran, therefore not only the trade on exports has slowed down significantly, but also in the domestic Iranian Mercantile Exchange the trade flow has diminished. The latest workable billet price on export from Iran was fixed at $475/mt FOB. Sources believe that the new tenders, if any, would be aimed at $5-10/mt higher price due to a limited availability. However, taking into account the global downturn, chances for such sales in the key outlets are quite small.

More Indian mills have become active in submitting billet export offers, which have been at $475-480/mt FOB officially, going down by $10/mt over the past week. However, the tradable prices, based on buyers’ price ideas, have fallen even further - to $450-460/mt FOB, from $470/mt FOB last week, amid the increased weakness caused by the higher volumes of ex-China offers and sales. The Indian billet reference price has slipped to $460-480/mt FOB, down by $10/mt.