Global View on Billet: Market loses direction, though negative mood restrained

Prices for billets in the global market have been moving in different directions this week. China has posted some rebound ahead of its long holiday and due to high iron ore prices, while many suppliers like Asian or Russia have been seeing the market as almost stable, with very cautious optimism for the future, and only some slight negative correction has been seen in Turkey.

Sentiments among ASEAN-based producers have changed from optimistic to stable, but this also signals that significant declines are not considered reasonable for sellers, since a part of materials for March shipment have already sold out and raw material prices are still relatively high. Ex-Indonesia 3SP billet official offers are at $530-533/FOB this week, down from $540-545/mt FOB announced ten days ago. A 50,000 mt sale by the Indonesian mill was done at $528/mt FOB last week. The destination for these volumes is unknown and market sources agree that it should be for a trader’s long position. Also, one deal for Latin America has been signed at slightly above $535/mt FOB. The previous ex-Indonesia deals were reported by SteelOrbis at $529-535/mt FOB depending on the destination. At the same time, one ex-Malaysia billet deal has also been rumored as having been done by a mill to a trader at $530-532/mt FOB. “Some deals are lower, some are higher. In any case, I do not expect big changes until the Lunar New Year,” an Asian trader said on Friday.

The ex-China reference price for 3SP billet has increased by $10/mt to $535-540/mt FOB mainly due to the recently announced monetary policy, higher iron ore prices and some gradual restocking in the local market. On January 24, the People’s Bank of China officially announced that the reserve requirement ratio (RRR) will be cut by 0.5 percentage points as of February 5, a move awaited since last week, and this will release RMB 1 trillion ($139 billion) in long-term liquidity to the market.

Following recent increases in the Chinese steel and raw material markets, billet offers in Southeast Asia’s import market have also rebounded again. The increase is nominal as most buyers have decided to postpone further purchases until the post-holiday period. Offers for 5SP BF billet for Asian origins have been reported at $550-555/mt CFR, increasing by $5/mt over the past week. After the latest deals for 5SP IF billet at $527/mt CFR Manila, there have been no new bookings or even offers for cheaper IF materials. The SteelOrbis reference price for imported billet in Southeast Asia has increased by $5-7/mt from last week to $540-542/mt CFR, mainly based on increased offers and the lack of cheap options at the moment.

In Iran, at least one export billet sale has been concluded for 30,000 mt at $492/mt FOB for March delivery, while some sources stated another mill has managed to close a tender this week at the same level. As a result, the workable price range for first-tier mills in Iran stands at $485-492/mt FOB, while second-tier producers and IF-based mills are at around $480/mt FOB and maybe a little lower. There are some hopes for sales to Asia, where offers from Iran have risen by $5-10/mt to $530/mt CFR Indonesia. Although the level has not been accepted yet, sources do not expect any significant discounts in the near term, given the lack of cheap options. In the domestic market, the US dollar equivalent of billet offers is at around $390-400/mt ex-works, SteelOrbis has learned.

The SteelOrbis reference price for ex-Black Sea billet has softened by $5/mt since late last week to $510-515/mt FOB, due to relatively low bids from major markets and still limited trading except for prompt shipment deals. Four deals for a total of 20,000 mt of ex-Russia billet for prompt shipment have been concluded at $547-553/mt CFR to the Karabuk and Iskenderun regions in Turkey. The price is relatively stable compared to the previous offers and deals for prompt shipment reported at $550-551/mt CFR. However, bids for ex-Russia billet for end-of-February shipment have softened to $540-545/mt CFR, translating to around $515/mt FOB. Moreover, a few trading sources said that, even though the offer billet volume from Donbass, the Ukrainian territory occupied by Russian forces, is limited, the current tradable level is not above $510/mt FOB.

Offers for billets of other origins in Turkey have been relatively stable, though buyers are not ready to accept them anymore. A few cargoes of ex-Algeria billet have been offered by traders at $560-565/mt CFR, versus previous deals for 80,000 mt at $557-559/mt CFR. Asian offers are rare and mainly at near $565/mt CFR. After the temporarily stabilization in scrap prices, Turkish buyers have taken a wait-and-see position, so local prices for billets have remained stable at high levels amid a lack of availability, while import reference prices have lost $5/mt over the past week.

Indian billet export activity has been moderate over the past week, but the latest bids and rare deal prices have been lower than anticipated by mills in view of rising competition and buyers resisting any hikes. Large Indian mills are heard to be submitting offers in the range of $525-535/mt FOB, but limited deals and bids are still the same as last week at $510-515/mt FOB. According to the sources, wider bid-offer disparities for Asian destinations prevented Indian sellers from concluding any deals for significant volumes. A tender-based export offer for 30,000 mt of 150 mm billet by a government-run mill closed lately was heard to have received a highest bid of $510/mt FOB, while the final contract has not yet been signed as the price was about $10-15/mt lower than internal expectations.

* - deal prices