Global View on Billet: Declines resume almost everywhere driven by weakness in China

The global billet market has weakened this week in almost all major sales destinations, even though scrap prices in Turkey have indicated some rebound. The main reason behind the downtrend has been the ongoing weakness in China, with more deals at lower prices reported from the country to distant markets. The outlook is also dim for the near future.

The ex-China reference price for 3SP billet stands at $470-475/mt FOB, down $7.5/mt on average since late last week. Most offers have been reported at $475/mt FOB, but deals on FOB basis have not been seen as traders are waiting for more declines in futures prices, which may trigger a further fall in spot prices. After iron ore rebounded above $105/mt CFR in the middle of the week, the fall in billet prices has halted for the moment. The latest deal was closed from China for 50,000 mt of billet at $518/mt CFR Izmir and another contract for a 30,000 mt cargo was signed at $538/mt CFR in Egypt, including size and high-manganese extras of at least $10/mt. Market sources are closely watch iron ore prices and futures.

Ex-ASEAN billet prices have remained at $490/mt FOB, in line with the deal for ex-Indonesia billet reported last week. A major Chinese trader said that Dexin is trying to conclude deals at $485/mt FOB, so some negotiations are possible with a firm bid. Ex-Vietnam offers have been heard at $490/mt FOB too, almost similar to last week.

Offers for ex-China 5SP billet to the Philippines have been reported at $500-505/mt CFR Manila, down from the asking price level of $510/mt CFR last week and a deal at $505/mt CFR. Chinese offers are the most competitive so far, but no one wants “to catch a falling knife”, sources said. If inventory pressure continues, prices from China to the Philippines may go below $500/mt CFR. Ex-ASEAN and some IF billet offers have been at $506-515/mt CFR Manila. The prevailing offers for 3SP billet from China to Indonesia and Thailand are at $495/mt CFR, but no deals have been confirmed, with most bids at $490/mt CFR or below.

Billet prices in Turkey have decreased since the recent holiday due to the weaker situation in China and, in fact, some buyers have chosen to book at the more attractive levels. In particular, a 50,000 mt ex-China billet lot was booked at $518/mt CFR Izmir, while shortly after that the workable levels were estimated at $515-517/mt CFR. However, since iron ore prices have rebounded slightly since then, Chinese suppliers became reluctant to go below $520/mt CFR. Offers from Malaysia and Indonesia have been indicative and at around $525/mt CFR. The same level has been offered for an ex-Bahrain 35,000 mt billet cargo by a trader, with no takers seen just yet. Offers from Ukraine have been reported at around $535-538/mt CFR, sources reported. Most market sources believe that the above levels may not be workable next week given the situation in the domestic billet market in Turkey. Turkish integrated producer Kardemir has traded 70,000-75,000 mt of billet at $535/mt ex-works for S235JR and $550/mt ex-works for B429 grade, which is around $10/mt lower than the previous market price. As a result, Asian billet origins are expected to drop below $520/mt CFR in order to be workable, while ex-Russia and ex-Donbass billet will have to dip below $510/mt CFR.

In fact, offers for Russian and Donbass origins have remained scarce and indicatively at $515-520/mt CFR, with bids at $500/mt CFR. However, the workable level may settle at around $505-510/mt CFR, Turkish buyers believe. The SteelOrbis daily reference price for ex-Russia billet has settled at $490/mt FOB, down $8-10/mt over the past week.

Ex-India billet prices have declined to the range of $475-490/mt FOB, down from the reference prices of $480-500/mt FOB last week. While last week offers at large mills were at $500-510/mt FOB, this week the mills have had to reduce their offers to at least $490/mt FOB, but sales at the lower prices have remained slow. An Odisha-based private mill is heard to have been talking about a deal for 30,000 mt with a trading firm at $470-475/mt FOB, though this price is considered to be too low for most sellers. An eastern region-based mill of a government run company is heard to have put up a spot export offer, setting a reserve price of $490/mt FOB on Monday, but there has been no confirmation about whether a deal has been concluded so far.