Global View on Billet: Downtrend resumes, ex-China sales dominate in most markets

Prices for billet in the international market have resumed their downtrend this week after a short pause. In addition to the seasonally weak long steel demand and high costs of production, the negative situation in China has been impacting sentiments and prices. At the same time, after the latest decrease, sales of Chinese billets by traders have accelerated in a number of destinations.

The ex-China 3SP billet reference price has settled at $470-480/mt FOB, down by $5/mt FOB since late last week. Most offers from mills have regressed to $475/mt FOB from the previous $480/mt FOB. But what is even more important is that more traders have started to offer and sell in short positions. As a result, up to 280,000-300,000 mt of Chinese billets have been traded to markets such as Turkey, Egypt, the Philippines, Indonesia and Taiwan since late last week, according to SteelOrbis calculations, through some rumors of even bigger sales volumes have been circulating (up to about 400,000 mt) but have remained unconfirmed. Most of the volumes have been sold in short positions, according to sources. “We don’t see many deals on FOB basis. The price is stable at $470-475/mt FOB if you want to purchase, but traders may buy these billets later [to cover the latest short positions],” a major Chinese trader told SteelOrbis on Friday. Real demand and the production of billets in China have been playing a much bigger role in influencing billet exports than iron ore prices fluctuations.

Ex-Indonesia billet offers have remained unchanged at $485/mt FOB after the previous deals done at $480-482/mt FOB. Market sources agree that if the Chinese market posts a further correction next week, additional discounts of around $5/mt FOB will be possible. Of course, it will also depend on sales of other products, with slab offers almost at the same level (just a mere $5/mt higher). Official offers from Malaysia and Vietnam for billets have been at $485-490/mt FOB.

Billet prices in Turkey have been under pressure this week despite relatively stable scrap prices and the somewhat limited number of offers. Some buyers, who restocked earlier, are out of the market, while others have been placing lower bids. In addition, Chinese billet sellers have been quite aggressive and, in fact, their aggression has led to some transactions, though most market players believe this was them shorting the market. According to sources, two 50,000 mt cargoes have been booked to Turkey, one at $510/mt CFR or slightly below, with the other at $517/mt CFR, for mixed billet grades. Initially, ex-China billet offers stood at $515-520/mt CFR earlier this week.  Another 50,000 mt, according to market information, have been booked by a trader to the Turkish market at the equivalent once again of $510-515/mt CFR. Accordingly, the total billet volume transacted to Turkey from China is around 150,000 mt of billet.

In addition, there has been information about Egypt also having booked at least one cargo, but the information was not confirmed by the time of publication. Chinese offers to Egypt and Tunisia stood at $510-520/mt CFR at the beginning of the week. Aside from China, Asian offers to Turkey have been indicative at $515-525/mt CFR depending on the origin, with no trades reported.

Overall, while China is being aggressive with such prices, most alternative sellers, including Black Sea region-based suppliers, have decided to take a step back. In particular, hardly any firm billet offer from Russia or Donbass has been heard this week since the possible workable levels are quite below suppliers’ expectations. The SteelOrbis reference price for Russian billet has settled at $485-495/mt FOB Black Sea, stable over the past week, with the lower end corresponding to $500-505/mt CFR Turkey. The indicative offers have been evaluated at around $10/mt higher and, according to sources, there have been small lots sold for prompt shipments at $515/mt CFR. However, this information has been denied by the supposed seller.

Chinese billets have been gaining some attention among Southeast Asian buyers with a few deals done, while most other origins have remained less competitive. A deal for 20,000 mt of ex-China 5SP 150 mm billet has been done at $489/mt CFR lately, down from offers at $495/mt CFR early this week and last week’s reference price of $497-505/mt CFR. Some offers from China have been heard at $490-495/mt CFR to the Philippines by the end of the week, with traders insisting on $495/mt CFR by Friday with some slight increase seen in Chinese futures prices. Another contract, also for 20,000 mt of ex-China 5SP billet, was signed at $491/mt CFR to Indonesia earlier this week. Negotiations for 3SP billet are still ongoing at $486-487/mt CFR and one Jakarta-based source said that a deal may be signed soon.

Activity in the import billet market in Taiwan has increased somewhat over the past ten days with a few sizable lots sold, mainly originating from Russia and China. Ex-Russia and ex-China base 3SP billets have been transacted at $480-485/mt CFR Taiwan, down by $5-10/mt from offers in late June. Also, vanadium-added billets have been traded at $500/mt CFR or slightly above, according to market sources. These origins are the cheapest, so buyers got what they wanted, with bids at these levels already heard since early July.

In Iran, billet export volumes have declined recently, mainly due to the limitations in production. Most local mills have almost halved their capacity utilization rates due to the shortage of the electricity in the market. Traditionally, in the summer months household electricity consumption increases and, given insufficient power generation, the supply to industries usually declines. As a result, mills’ costs have increased and they are less eager to sell billet abroad, in particular due to the ongoing downtrend in the global market and the aggressive stance of China. Lately, only one 30,000 mt deal has been reported, by Esfahan Steel Company (ESCO) at $475/mt FOB for August shipment. IF billet prices for export have increased by $10-20/mt to $450/mt FOB. In Turkey, the CPT prices from Iran have been voiced at $480-490/mt DAP to Iskenderun and $510-515/mt DAP Karabuk. In the GCC, Iranian billet has been available mainly at $490-500/mt CFR.

Ex-India billet offer prices are stable at $485-490/mt FOB with the only “live” offer currently being an export tender for 30,000 mt by a government-run mill scheduled to close on July 10, while private mills are largely quiet on the export front. The buyers’ trade ideas are not above $470/mt FOB. So, the reference price of SteelOrbis has settled at $470-490/mt FOB, down by $5/mt on the lower end over the past week. The downtrend in local merchant billet trade has gained momentum in tandem with the fall in the rebar market. Billet trade prices are down INR 1,200/mt ($14/mt) to INR 41,500/mt ($497/mt) ex-Mumbai.