It is no surprise that the weakening world markets for scrap, slab and billets have already affected the North American semis market negatively. Billets and slabs have both registered hefty decreases since last month, and the slide is not yet over.
Once a tight market, billet availability in the US has improved, as worldwide billet demand plummeted and flattened all US export possibilities. It is not really a matter of price, but probably a matter of time before billet buyers start committing again, though prices could dip even lower when that time comes.
Poor demand and the major US scrap price decline of $275 /lt observed since the beginning of the month have also put downward pressure on billet prices.
Current US billet prices are below $700 /nt ($771 /mt) ex-works, reflecting a significant decrease from August, when prices were at $920/nt ($1,014 /mt).
Market sources believe that billet prices had risen to unsustainable heights and that the market is now under correction. Billet prices may remain at the current low level through at least October.
Worldwide, billet prices came down in September as well because of the slowing European and Middle East markets and the one-month Ramadan religious holiday, in addition to the strengthening US dollar. International prices are much closer to the domestic prices today than they were earlier this year.
CIS origin 3SP-5SP billets are currently being offered by CIS producers for export at $600 to $610/mt FOB Black Sea for November shipments. The CIS producers are continuing to reduce the price levels of their export offers.
The slowing worldwide billet demand and the strengthening US dollar have also reduced US billet export activity. The total amount of US carbon billet exported in July was 13,029 mt, which is 6,019 mt less than the figure of 19,048 mt in June, 2008. The main export destinations of US billets during the period were: Dominican Republic, at 5,105 mt; Taiwan, at 3,721 mt; and Italy, at 2,266 mt.
As for imports, 22,510 mt of billet was imported by the US in August, which shows a slight decrease of 719 mt when compared to July. During the period, the US mainly imported billets from: Mexico, at 10,476 mt; Brazil, at 6,730 mt; Canada, at 3,830 mt; and Japan, at 1,360 mt. China and United Kingdom also exported some billet tonnages to the US during this period.
The US slab market is seeing similar market conditions to those in the domestic billet market. After several years of being a seller's market, supply finally exceeded demand because flat rolled re-rollers have slowed their purchases in step with their slow sales. Also, the huge scrap price decline increased the expectations of a further price slide, keeping the distributor and end-user demand at bay for the time being.
Slab prices have come down by approximately $250 /mt from a month ago to the current international price of below $800 /mt FOB Black Sea. In Asia, suppliers are offering $730 /mt CFR to other Asian buyers, who are not accepting this price level and are asking for $700/mt CFR. Market sources expect that slab pricing will keep trending down in the near term. However, as the finished goods inventories are not believed to be excessive, and iron ore is still trending up for the upcoming year, the downward trend is not expected to last long.
Total tonnages of import slabs arriving in the US during August were 334,279 mt, which is 231,209 mt less than the tonnage imported in July. The largest quantities of slabs imported in August came from: Ukraine, at 128,812 mt, and Russia, at 106,028 mt. Other smaller slab sources during this period included India, Canada, Mexico and Brazil.