The US semis market is currently very tight, as supply is low in relation to demand, and raw material prices remain strong worldwide. As a result of these factors, US billet and slab prices have been increasing since the beginning of the year, and it is expected that this upward trend will continue in June.
Many billet producers are behind on their shipment orders and therefore re-rollers in the US are still accepting deliveries at price levels as low as $750 /nt ($827 /mt or $37.50 cwt.). However, with the June deliveries, large increases are expected to reflect the big gains in scrap prices in April and May. Because many mills had some difficulties in procuring sufficient amounts of scrap, billet supplies are on the low side, and this is creating tightness in the market. The pricing trend for billets is pointing upwards for June, although end-use demand for long products is not equally strong.
Market sources predict that billet prices will rise to approximately $925 /nt to $950 /nt ($1,020 /mt to $1,047 /mt or $46.25 cwt. to 47.50 cwt.) in June, reflecting an increase of approximately $180 /nt ($198 /mt or $9.00 cwt.) within the time frame of a single month.
Although billet prices are increasing strongly, current US prices are still below the international level, which is at least $1,000 /mt FOB. CIS origin 3SP-5SP billets are currently being offered by CIS producers for export at around $1,080 /mt to $1,100 /mt FOB Black Sea for late July shipments, while in Turkey, billet producers are offering to the export markets at price levels of $1,110 /mt to $1,120 /mt FOB for August shipments.
The tight domestic billet supply is reducing the amount of billet exports as well. As for US exports, in March most of the US carbon billet tonnage went to Venezuela and Taiwan. The total amount of US carbon billet exports was 4,228 mt, which is 2,629 mt less than the figure of 6,857 mt in February 2008.
On the billet import side, the most recent data from the US Steel Mill Import Monitor show that during April 2008 the US mainly imported billets from: Canada, at 4,303 mt; Mexico, at 2,136 mt; and Japan, at 581 mt. The total amount of billets imported in April was 18,502 mt, which is 8,756 mt more than the amount of 9,746 mt in March.
The supply and demand dynamics of the slab market are currently very similar to those of the billet market. Slab demand is exceeding supply, causing slab prices to rise, though today's demand is lower than the traditional demand level.
Import sources of slabs are now asking for approximately $1,020 /mt to $1,100 /mt CFR West Coast and Gulf Coast for the third quarter, which is an increase of around $200 /mt from a month ago. This price increase is attributable to price hikes in hot rolled coils as well as the tight slab supply. Market insiders believe that if the flat rolled market stays strong, even more price increases may take place for both slabs and coils in the third quarter.
In general, slab buyers are keeping their slab inventories at a low level to avoid interest costs as well as price risks, fearing that once the market peaks, slab prices could decrease rapidly.
The largest quantities of import slabs arriving in the US during April 2008 came from Brazil, at 109,031 mt; Ukraine, at 106,870 mt; Canada, at 101,354 mt; Russia, at 94,963 mt; and Mexico, at 65,255 mt. Other smaller slab sources during this period include Japan, India and Australia. Although slab prices are increasing, the total amount of slabs imported into the US went up from 368,417 mt in March to 561,061 mt in April, showing an increase of 192,644 mt.