The US market has seen strengthening billet prices since our last report three weeks ago due to the strong scrap prices as well as the higher prices obtained for finished products. However, this trend may soon be changing with the recent softening of scrap prices along with the lukewarm demand for billets. Availability is good, and some domestic billet suppliers are even considering exporting to areas with hot demand, such as South America and the Middle East.
Current domestic billet prices range from $585 - $600 /mt ($531 /nt - $544 /nt or $26.54 cwt - $27.22 cwt) delivered, for commercial rebar and wire rod grades. This price level should be maintained until early summer. Billet suppliers also have a vested interest in keeping the billet market afloat in order to get higher prices for their finished products. The demand for most long products in the US remains decent and is expected to get stronger as we get closer to summer, which is when construction activity will reach its peak. Long products should not see a downward pricing trend until the third quarter of 2007.
In the major world markets, CIS billet export offers are currently in the price range of $540 - $550 /mt ($490 /nt - $499 /nt or $24.49 cwt - $24.95 cwt) FOB Black Sea for May shipments. Billet offers from Turkey are at $565 - $570 /mt ($513 /nt - $517 /nt or $25.63 cwt - $25.85 cwt) FOB. Turkey, once a major billet exporter, does not have a lot of export capacity currently and has been importing billets, due to strong domestic consumption. Finally, Chinese offers are in the range of $480 - $500 /mt ($435 /nt - $454 /nt or $21.77 cwt - $22.68 cwt) FOB, and there is an additional export tax on Chinese semi finished products.
For imports to the US, the most recent data from the US Steel Import Monitor show that during the first quarter of 2007, the main countries that exported billets to the US were: Brazil with 53,371 mt, and Canada with 18,812 mt. Some other countries that exported billets to the US during this period were Japan, Russia, UK, Switzerland, Mexico, and China. The total amount of billets exported to the US in the first quarter of 2007 was 73,617 mt. Imports of billets are only feasible for special grades, as common grades are in plentiful supply domestically.
As for the slab market, the strong international slab demand along with tight supplies and continuous price increases in raw materials and domestic flat rolled products are allowing the US slab prices to rise slightly.
Flat rolled prices are on the rise worldwide, though the US market is lagging behind the rest of the world. US steel mills such as Nucor and Mittal have announced price increases for their finished products, but domestic demand is still quite flat. An insider considers this to be a strange market situation because prices normally increase when the demand is strong, and now the opposite is happening. Increasing flat rolled prices are making buyers hesitate further, resulting in a further lessening in demand. For these reasons, the US flat rolled producers are trying to export hot rolled coils, as the European prices are now more attractive than the domestic prices.
With the arrival of spring, steel markets in the CIS, Europe, the Middle East, and especially Turkey, are expanding, and in turn, are keeping worldwide slab demand strong. Many traditional slab suppliers in Russia, Ukraine, Brazil are also supplying to their home markets, limiting the export capacity. Moreover, the Chinese export tax for semi-finished products has reduced the exports from China. Today, CIS mills export mostly to Europe, as they can get a higher FOB rate and cheaper ocean freight rate from Europe than from the US or Asia. This situation will keep slab availability in the US tight for a while.
New slab offers are primarily coming from Brazil, Mexico, CIS, Russia and Ukraine, while a small amount is coming from Western Europe and India. Slab offers to the US have strengthened at least by $20 /mt since our last report three weeks ago. The current slab price is $500 - $520 /mt ($454 /nt - $472 /nt or $22.68 cwt - $23.59 cwt) FOB Port of Origin, and it is now difficult to find suppliers that sell for less than $500 /mt. Slab prices are expected to go up along with flat rolled prices until the third quarter.
The largest quantities of import slabs arriving in the US during the first quarter of 2007 came from Ukraine with 264,856 mt, Russia with 246,991 mt, Mexico with 104,925 mt, and Brazil with 116,168 mt. Slab imports to the US during the same period also came from Australia, Japan, Venezuela, Canada, Austria, China, Italy, UK, and Sweden. 1,010,829 mt of slab arrived in the US in the first quarter of 2007.