Global View on Billet: Deals signed only with discounts, no improvement in Asia

The price trend has remained negative in the global billet market this week. Large billet exporters have had to provide discounts to keep signing deals. With no improvement in the scrap segment, the mood has remained pessimistic in Asia, weighing on billet prices.

Mills based in the ASEAN region provided some small discounts to sign further deals for billets early this week, while even lower contract prices have been reported by the end of the week, as the mood in the market has failed to improve so far. The offer level from the leading Indonesian mill was reported at $490/mt FOB early this week. But the deal prices declined first to $487-489/mt FOB, from $490-495/mt FOB last week. In particular, a contract for 10,000 mt was signed in the local Indonesian market at $488/mt FOB, and a larger volume was sold to Turkey at around the same price. Moreover, by the end of the week, deals for at least 70,000 mt of billets for May shipment have been done by Indonesia’s Dexin Steel at $480/mt FOB. The final sales destination for these volumes is unclear, but there is market talk that they are intended to cover the previous short positions of traders. This FOB price level translates to around $515/mt CFR Turkey for at least 40,000-50,000 mt, while it is equivalent to $500/mt CFR in Southeast Asia.

The ex-China 3SP billet reference price stands at $480-485/mt FOB, up by $2.5/mt on average from last week, reflected some increase in futures prices before the market closed for a holiday on April 4-5. Last week, ex-China 3SP 150 mm billets were sold to Taiwan at $490-495/mt CFR, translating to slightly below $480/mt FOB, but this level seems to be the lowest in the market. The main mill shipping from Russia’s Far East region has been trying to sell additional tonnages at $500/mt CFR Taiwan, after $500-505/mt CFR reported last week for 100,000 mt, but Chinese material has been more competitive. China’s National Development and Reform Commission (NDRC) held a meeting with major enterprises, aiming to promote the implementation of policies to drive more equipment renewal, and production restrictions. If there are more concrete announcements on how Chinese mills will reduce steel production and improve margins, the trend in the billet market may be reversed. Otherwise, sentiments will remain bearish.

The SteelOrbis reference price for import billet in Southeast Asia has softened further, to $490-510/mt CFR, with the average being $5/mt lower than last week. The lower end represents the latest sizable ex-China bookings done to Taiwan at $490-495/mt CFR, while a few buyers in Indonesia also confirmed that traders’ offers have been at $485-490/mt CFR this week. In the Philippines, the latest offers for Asian origin 5SP 150 mm billet have been at $500-510/mt CFR, while buyers are assessing the current workable prices at not above $500/mt CFR. Deals are limited at the moment as the market may fall below this level next week, buyers believe.

In Turkey, while domestic offer price levels for billet have remained indicative and largely unchanged at $555-565/mt ex-works, the workable import price range has softened over the past week. Although the allocation from Russia and Donbass is still limited, its effect on the Turkish market has lately been offset by the aggressive ex-Asia pricing. According to sources, at the end of last week a 40,000 mt billet cargo from Indonesia was sold to Turkey at around $522-523/mt CFR, although some sources reported the price as $520/mt CFR. In addition, there has been talk about another ex-Indonesia sale at $515/mt CFR early this week, but the information was not confirmed by the time of publication. However, the levels of $515-520/mt CFR Turkey are considered possible, given that the latest positions for Indonesian billet have been taken by traders at $480/mt FOB. Ex-China billet offers were heard in Turkey at as low as $510/mt CFR earlier this week, down from $515-528/mt CFR seen previously. However, due to the holiday on April 4-5, no firm offers from China have been placed at the end of the week. Some sources have reported ex-Malaysia indications increased by around $5-10/mt to $530-535/mt CFR, which is considered a bit on the high side for now. Ex-Iran offers have been heard this week at around $495-500/mt delivered to the Karabuk region.

As mentioned earlier, the number of offers from Russia and Donbass has been scarce lately, but the suppliers report that the achievable level is not higher than $490/mt FOB or $510/mt CFR Turkey. Offers for prompt shipment cargoes from Russia have remained at $540-545/mt CFR Karabuk, with no fresh deals reported. The SteelOrbis daily reference price for ex-Russia billet has dropped by $17.5/mt over the past week to $490-495/mt FOB Black Sea.

Iranian billet prices are set to weaken further, due to the currently weak Asian market, seasonally slow GCC demand, and the sliding Turkish market. Earlier, a 30,000 mt billet tender was closed by a first-tier supplier at $483/mt FOB, followed by a 15,000 mt tender by another mill at $477/mt FOB. The most recent bids to the Iranian suppliers are mainly below $470/mt FOB, causing sellers to hold back from active trade in the hope of a market recovery. In addition, according to sources, induction furnace billet has been on offer at $450/mt FCA Iranian border and at slightly below $465/mt FOB Bandar Abbas. The FCA lots will most probably be targeted for the Turkish market, with the delivery cost evaluated at $45-50/mt.

Ex-India billet reference prices have softened by $5/mt to $480-490/mt FOB as some sellers have agreed to provide discounts, seeing a further weakening of bids. According to the sources, at least three to four private mills and a government-run producer have been active in pushing volumes overseas even though some of the largest mills have not wanted to sell at the current low levels. A private mill reported a trade for 20,000 mt for delivery to Singapore for onward sale at $480/mt FOB, while a government mill received the highest bid at $482/mt FOB in its latest tender for 30,000 mt of 150 mm billet.

* - deal prices