Global View on Billet: Is the market ready for declines?

The positive sentiments in the global billet market in the first week of January have quickly become more negative. Despite some gradual increases in ex-Black Sea billet prices, a small downward correction or a stabilization has been seen in other markets. But is the global market ready for large-scale price decreases? Most market sources are still cautious on the issue.

Official offer prices for ex-Indonesia and ex-Malaysia 3SP billet are at $530-535/mt FOB, down by $5/mt from last week, as suppliers have been following the changes in the Chinese market. However, the market in general has been assessed as firm since Asian buyers have started to gradually accept previous rises. The latest deals from an Indonesian mill have been reported at $527/mt FOB, $529-530/mt FOB and $533/mt FOB, showing a very small change from last week’s contracts at $530-532/mt FOB. Market sources said that these tonnages were for traders and for the Asian market and Latin America.  

The mood in the Chinese billet market has worsened as futures prices have been going down, while iron ore prices have come close to $130/mt CFR, down from above $140/mt CFR early this month. The reference price for ex-China 3SP billet is at $525-530/mt FOB, down by $17.5/mt on average from late last week. The average local billet price has settled at the equivalent to $455/mt, excluding 13 percent VAT.  

In Southeast Asia’s import market, offers for ex-ASEAN IF billet offers have again emerged at relatively low levels - $527-530/mt CFR, so a further uptrend in Southeast Asia is doubtful. At least one deal for 10,000 mt of Malaysian material for February shipment is heard to have been done to the Philippines at “near $530/mt CFR.” This price translates to $540/mt CFR as tradable for BOF billet, according to sources. The latest deal for BOF material to the Philippines was done for 20,000 mt of Indonesian 5SP billet at $542/mt CFR last week.    

In Turkey, there has been some movement in the domestic billet market, while the overall workable price levels have not declined due to relatively strong import scrap prices. Integrated producer Kardemir has sold close to 60,000 mt of billet this week at $580-590/mt FOB depending on the steel grade and with a deferred payment option. The price levels for billet in the other regions of Turkey are now estimated at $585-595/mt ex-works, supported also by a scrap-related hike in the rebar segment. Still, the situation is considered to be somewhat shaky given the still insufficient exports of rebar.  

In the import segment, the number of offers for billet of non-Russian/Donbass origin has been limited and the voiced indications are generally considered to be unworkable. The evaluated price levels from Asia are at around $565-570/mt CFR, which is too high for such a long lead time and also in view of the potential additional risks linked to Red Sea navigation. Some traders have voiced $560-565/mt CFR prices for Algerian origin, citing the recent tender held by AQS. However, many believe that the sellers are going short since, according to the market information, the tender has not been closed as the mill targets around $540/mt FOB, versus bids received at $525-530/mt FOB. 

As for Russia and Donbass, actual trading has been relatively slow this week, with the most recent deal closed for a prompt Russian cargo at $551/mt CFR. The realistic level of indications for Donbass material have stood mainly at $540-545/mt CFR this week, while some Russian producers are aiming for $550/mt CFR and slightly above. Some bids from Turkey, which are currently not numerous, are still at $530-535/mt CFR. Overall, the number of firm offers for the mentioned two origins is limited at present. In fact, one or two large producers are expected to resume offerings next week for March production, while one of the producers, who is not a regular in the export market, has voiced $530/mt FOB Novorossiysk. This level is certainly unacceptable for Russian origin in Turkey and also in Egypt, where the offer level is generally at $550-555/mt CFR, stable from late December. As a result, the SteelOrbis daily reference price for ex-Russia billet has been set at $512-517/mt FOB, with the midpoint at $514.5/mt FOB, up $4.5/mt over the past week.   

Iranian billet export activity has been poor this week, following several tenders closed in the previous couple of weeks. The workable prices have remained within $485-490/mt FOB, though some sources report that buyers have started to push for discounts. One of the reasons is the worsening of the situation in the Suez Canal and the Red Sea, which puts navigating the area under even greater risk than before. As a result, freight rates will remain high for shipments through the region and may increase further. However, import scrap prices in Turkey are still high, while the billet allocation in the Mediterranean region is somewhat limited. In the GCC, the level of offers for ex-Iranian billet has remained at around $520-525/mt CFR Jebel Ali, while in Turkey prices have varied at $510-520/mt, delivered depending on the producer and tonnage. There has been a rumor of a fresh 30,000 mt billet deal from an Iranian mill to an international trader at slightly above $487/mt FOB, but it has been denied up to the time of publication. 

Ex-India billet prices have been quoted in the range of $515-525/mt FOB, compared to $520-530/mt reported last week. Both government and private mills are seen to be putting up volumes for export as the local market continues to show a rapid decline in terms of sales volumes. A government-run mill has held a tender for 30,000 mt, with the highest bid at $525/mt FOB, slightly lower than the $530/mt FOB targeted by the seller. However, there has been no confirmation of whether the mill agreed to the price. Another Odisha-based integrated mill has reported a spot sale of 15,000 mt at $518/mt FOB.   

* - deal prices