Global View on Billet: Downward pressure persists as scrap prices fall, China fails to improve in line with expectations

The situation in the global billet market has failed to improve this week and in the major sales destination prices have indicated further slight decreases. The downtrend has been driven by falling scrap prices in Turkey and the absence of significant improvements in the Chinese market.

The ex-China 3SP reference price has settled at $510-515/mt FOB this week, down by $5-10/mt from late last week. Even though steel futures prices in China posted some rebound on Tuesday and Wednesday, they returned to a declining trajectory by the end of the week, signaling that slow demand in China is still exerting a lot of pressure. Also, since Monday, February 26, rumors of a possible export ban or export duty on semi-finished products from China have emerged, following an increase in billet sales overseas lately due to weak local market conditions. However, the government has started checks on mills and no concrete announcements or documents have been heard. From 80,000 mt to 100,000 mt of Chinese billet were sold to Asian buyers over the past week, according to sources.

The main Indonesian mill has kept its offers for 3SP billet at $520/mt FOB, while indicating a $5/mt higher level for 5SP. Following reports of 50,000 mt of ex-Indonesia billet sold last week to the South American and Asian markets at $515/mt FOB, market sources have said this week that in total the mill managed to trade over 100,000 mt last week and early this week, with the major part going to traders for positions.

Prices for imported billet in Southeast Asia have as expected stabilized at last week’s levels, after a number of deals from China and the ASEAN region. Last week, following deals for 20,000 mt of ex-China 5SP billet with manganese content of 0.7 percent to the Philippines at $538-540/mt CFR (translates to $535-538/mt CFR Manila as a part of the material will go to Davao), there have been reports that ex-Indonesia 5SP billets have been traded to Manila at $535/mt CFR and $537/mt CFR, also for at least 20,000 mt in total. Some offers are at stable levels, but the most recent offers for 5SP and 3SP billet of Chinese origin have been reported at $540-545/mt CFR to both the Philippines and Indonesia. Some market sources believe that the market has hit the bottom, but a lot will depend on Chinese futures prices and on whether they will stabilize or keep sliding next week.

Commercial billet sales from Russia’s Far East region to Taiwan have been done at $515-518/mt CFR for May shipment, down from the previous level of $525/mt CFR. There have been no reports of sales of Iranian billet to Asia recently, but the tradable level is assessed at $520-525/mt CFR, which is unacceptable to the mills.

In Turkey, the integrated producer Kardemir has traded around 45,000 mt of billet at $565/mt ex-works, down $15/mt from the previous price, while many expected a smaller decrease. As a result, some market sources believe some movement may be seen in the domestic market for longs, specifically taking into account seasonal factors. But, for now, rebar demand remains insufficient, and, following Kardemir’s sales, the general billet price in Turkey stands at $565-585/mt ex-works.

In the import segment, the situation is rather vague as there is a lack of solid offers in the market since buyers are not in a position to purchase, at least not in large lots. Asian billet, from Malaysia and Indonesia, has been on offer at $550-555/mt CFR from the regular traders, down $10/mt over the past week. Some sources report Asian origins were offered at $535-540/mt CFR by some supplier, though many consider such an offer to just constitute “fishing”.

The latest deals from Russia were closed last week at $545/mt CFR Karabuk and $549/mt CFR Izmir for prompt shipments. Currently, the same supplier is offering $545/mt CFR to the northern part of Turkey. For April shipments, Turkey is expected to target nothing less than $530/mt CFR for Russian and Donbas origins. The SteelOrbis reference price has stabilized at $510-517/mt FOB Black Sea, but the indication may soften next week, especially if lower levels for import scrap are registered shortly.

Iranian billet prices have increased on average by $5/mt over the past week, given the most recent sales closed by one of the first-tier mills. According to sources, Esfahan Steel Company (ESCO) has traded a total of 30,000 mt of billet this week at $507/mt and $510/mt FOB for May shipment, which is considered to be slightly on the high side. Some bids at $485/mt FOB were not accepted by the supplier, sources report. In addition, this week the Iranian authorities have approved the adjustment of export duties for semis and raw materials. In particular, both slab and billet are now subject to one percent duty instead of the previous two percent.

Ex-India billet prices have improved gradually over the past week, but mainly amid deals to a few traders and neighboring markets. Deals have been reported at improved levels of $515-525/mt FOB, compared to low levels of $500-510/mt FOB a week ago. Private mills have been holding back offers, expecting prices to consolidate higher, reacting to reports of price improvements in China. Also, local sentiments are also buoyed by reports that a government mill which held an export tender for 30,000 mt on February 27 received the highest bid of around $520-525/mt FOB, significantly higher than expected by market sources. A few market sources said that the deal seems to have been done and that the material is expected to be supplied to Sri Lanka. But in other sales destinations, workable prices for billets are still lagging behind.

* - deal prices