In line with the rallying world
billet markets, the US
billet market is also picking up in January while other semi-finished products, namely steel slabs, are only inching up at a snail's pace.
The increase in the
scrap and raw material prices at the beginning of January spurred
billet prices to go up. After a quiet holiday season,
billet purchases resumed. However, there is no shortage in the current US
billet supply. Unlike the rallying
billet markets in
Europe and Asia, US prices have only been going up modestly.
Aside from the raw material increases, another factor fueling
billet price increases is the strong bar and
rebar market. Despite the cold weather,
construction activity has not slowed down too much, and there is still higher than normal demand for bar and
rebar products. Even though demand for
wire rod is sluggish, other long products are strong enough to keep
billet demand healthy.
Nevertheless, purchasing billets on the open market and converting them to finished products is not a lucrative business. Certain mills whose rolling capacity exceeds their melting capability still opt not to fill their rolling capacity by buying billets from the spot market. Currently, the pricing gap between billets and long products is too narrow to convert billets at a profit. Therefore, these mills choose to operate below their full rolling capacity.
Overseas
billet price increases have impacted the US
billet market to some extent, but have not had a major effect. While US domestic prices have only increased approximately $10 - $15 /mt, other major
billet markets went up significantly.
CIS billet export offers currently range from $470 /mt to $475 /mt FOB Black Sea for April shipments, and more increases are expected. Turkish prices are especially high, now ranging from $490 /mt to $500 /mt FOB Turkish mills.
Turkey's domestic demand for billets is strong, and due to the bustling
construction industry there, mills that normally export have been focusing on the domestic market for
rebar re-rolling.
Asian
billet prices have also been rising sharply, boosted by the Chinese export tax.
The most recent data from the
US Steel Import Monitor show that during the fourth quarter of 2006, the main countries that exported billets to the US were:
Brazil at 25,997 mt,
Russia at 24,525 mt, and
Canada at 18,725 mt. Some other countries that exported billets to the US during the fourth quarter were
Germany,
Japan,
UK,
Switzerland and
Italy. As of Jan 23, 2007,
Brazil is still the top
billet exporter to the US in January, at 12,403 mt, while
Canada,
Russia,
Japan and
Mexico see some export activity to the US as well.
As for the
slab market, it is relatively soft right now, and it is slowly developing along with the hot rolled market. Demand and supply are in balance today. Suppliers are not desperate to sell, and most of them prefer European buyers due to the favorable exchange rate. Europeans are able to pay higher prices than the US buyers; the US
slab market price is the lowest when compared to the rest of the world. Insiders believe that demand and supply will improve in the second quarter as the US
slab market starts to follow the rest of the major world markets.
The US flat rolled market remains pretty weak, but it is slowly turning around. In other world markets, flat rolled prices are increasing, though they are not going up as strongly as long products. US flat rolled mills are coping with sluggish and low-priced sales and do not want to pay the
slab prices that are being offered now. At the same time, they must buy slabs in order to keep their rolling mills operating. This is a major dilemma for the US mills without significant melting capacity today.
The main countries currently offering slabs are
Brazil,
Mexico and
Russia. New import prices are coming in at a base price of over $450 /mt CFR FO, closer to $460 /mt.
Mexico's prices are more expensive.
The largest quantities of import slabs arriving in the US during the fourth quarter of 2006 came from
Ukraine at 431,838 mt,
Russia at 323,911 mt,
Mexico at 258,946 mt, and
Brazil at 216,876 mt.
Slab imports to the US during the fourth quarter were from
Australia,
Japan,
Italy,
UK,
Canada,
China,
India and
Germany. As of Jan 23, 2007, US import slabs in January are primarily coming from
Ukraine at 76,018 mt, while
Venezuela,
Russia,
Australia,
Mexico and
Brazil are the other main
slab exporting companies to the US in January.