Global View on Billet: Market falls further as expected, outlook differs depending on destination

This week has remained negative for the global billet market with China’s return being unusually weak after a long holiday. Though prices in Turkey and the CIS have been relatively stable, the mood has definitely been impacted, while in Asia a number of sellers have cut offers to accelerate sales. Nevertheless, the outlook for the coming few weeks differs depending on the destination. As for Asia, market sources are waiting for an improvement in trading in the steel market, and so prices are not going to fall further. At the same time, in the MENA region, bearish expectations in the scrap segment may trigger further billet price declines.

Ex-ASEAN billet offer prices have lost $5/mt since last week to $520-525/mt FOB as China has made a weaker return than expected from its holiday, and actual deals have been done at $515/mt FOB, down by $6-10/mt from the week before the Lunar New Year holiday. In total, up to 50,000 mt of billets have been traded from a major Indonesian mill at this level to South America and Asia. Although most of the week has been negative in Asia with sharp drops in iron ore prices, very slow local steel demand in China, and dropping futures prices, by the end of the week cautious optimism has emerged with some stabilization of iron ore prices and an improvement in local demand in China, which has started gradually on Friday and is expected to accelerate next week.

Sentiment in Southeast Asia’s import billet market has remained bearishness, affected by China. As a result, prices for Chinese origin billet and offers from Chinese traders in short positions have become the most competitive in Southeast Asia. The SteelOrbis reference price for ex-China 3SP billet stands at $515-525/mt FOB, down by $5/mt compared to the pre-holiday period and most deals have been signed near the lower end of this range.

Around 20,000 mt of ex-China 5SP billet with manganese content of 0.7 percent and above have been sold at $538-540/mt CFR to the Philippines, which is in line with offers voiced early in the week, but down from the majority of offers at $545/mt CFR last week. But at least one source said that this will go not only to Manila, but to Davao too, where freight is usually at least $5/mt higher, making the real CFR price close to $535-538/mt CFR. Ex-China deals for 3SP and 5SP billets have been heard at $535/mt CFR and $540/mt CFR Indonesia, while, in the local Indonesian market one of the producers traded in total 40,000 mt of both 3SP and 5SP (with different manganese content) at the average price of $542/mt CFR early this week. A few inquiries are heard from Malaysia with negotiations at $535/mt CFR.

The Turkish billet market has remained silent this week with few sales rumored. In addition, the scrap segment remains rather weak, causing some billet customers to delay purchases. There has been a 40,000 mt booking from Malaysia rumored at $564/mt CFR. This level is in line with the latest ex-Malaysia offer heard in the past ten days, though the overall allocation from Malaysia remains limited. However, the sale has been denied by the supposed purchasers and the price is considered to be on the high side for such a volume. The indication for ex-Asia billet is still at around $560-565/mt CFR and maybe a little above, although a couple of traders have been heard fishing around with $545-555/mt CFR offers for both Malaysian and Indonesian offers. Ex-GCC billet prices are estimated at around $530-540/mt FOB and, with around $35-38/mt freight for a minimum of 30,000 mt, they would not be workable for the Turkish market.

Ex-Russia billet reference prices have remained at $510-517/mt FOB this week, with minimal activity reported in the market. Some producers have been claiming offers at $520/mt FOB and assessing $515/mt FOB as a tradable level, but the buyers’ price ideas have been lower, bringing the market almost to a standstill. Production at one of the mills in Donbass, the Ukrainian territory occupied by Russia, is suspended for now. The tradable level for ex-Russia billet in Egypt has remained at $550-555/mt CFR, while offers are rare and not below $560/mt CFR.

Indian private mills have joined government-run producers in increasing offer volumes for overseas sales, with offers at $510-520/mt FOB, but most tradable levels have remained lower, in the range of $500-510/mt FOB, unchanged over the past week. A government-run mill has floated two “live tenders” over the past one week aggregating at 45,000 mt, while a second government mill has also floated an export tender for 20,000 mt, to close later this week, with price expectations near $505/mt FOB.

* - deal prices