Though the strengthening scrap market has helped billet prices to go up slightly, the slab market is still very quiet.
The US billet market is still feeling the effects from July, the traditional slow summer month, as demand has continued to be sluggish and supply plentiful. One local billet buyer summed up the current situation in one sentence, "You can place orders but there is no demand." Though demand is not robust by any means, local billet prices have gone up approximately $10 /mt since one month ago due to the bouncing scrap prices. Current billet prices in the US range from $500 /mt to $520 /mt delivered to rolling mills. Scrap prices have increased by approximately $20 / long ton for September shipments, but it is questionable whether or not billet prices will follow the upward trend since billet demand is meager.
On the other hand, there is feverish export activity with all major trading companies reporting that they have concluded major billet deals, primarily to South America and some to Europe. As import activity for most steel products is at a crawling pace, traders have been finding some solace in working on export deals for flat rolled and recently for billets.
Previous billet export deals were concluded at around $440 /mt to $450 /mt FOB loading port levels, whereas new deals are being discussed at $470 /mt to $480 /mt. New prices are up due to scrap increases. Also, freight rates from the US have gone up approximately $10 /mt to $20 /mt within the last couple of months which helps the new deals to stick. Nucor and CMC are the two main producers that are exporting right now.
Statistics as of June 2007 show that US semi-finished export tonnage was predominately shipped to Canada and Mexico. Billets were exported from the US mainly because of the weak US dollar, the fragile US finished product markets, and high billet availability.
For the international markets, Turkish billet export offers are slightly above $540 /mt FOB. CIS origin 3SP-5SP billets are currently offered at around $515 /mt to $520 /mt FOB Black Sea for October shipments, though not many sales have been concluded at these levels. CIS producers are trying to maintain their prices as they are optimistic about the market.
Very little imports have been concluded. The most recent data from the US Steel Import Monitor show that during July and August 2007, the only countries that exported billets to the US were: Canada with 12,613 mt, and Brazil with 6,502 mt. Mexico also exported a small amount of billets during the same period.
On the other hand, the slab market in the US is quiet on both the domestic and import side. Although a flat rolled price increase of $20 /nt to $30 /nt has been announced by US mills for October shipments, market sources say it is doubtful the increase will be accepted by the market. This causes the slab buyers to hold back from any transactions as they want to feel out the market conditions first.
The current market price for slabs ranges from $480 /mt to $500 /mt FOB loading ports. Asian buyers are seeking offers for $450 /mt FOB. Slab purchasers expect that slab prices in the fourth quarter will be lower than $450 /mt FOB due to low demand.
The fourth quarter is usually a slow quarter. There is the Thanksgiving holiday and a short month of December, which makes the slab buyers keep away from replenishing their inventories and instead try to keep their inventories at lower levels to finish the year with minimum stocks.
There are just a few slab suppliers in the market now. The largest quantities of import slabs arriving in the US during July and August 2007 came from Ukraine with 220,629 mt. Following Ukraine was Mexico with 204,020 mt, Russia with 153,749 mt, Brazil with 123,550 mt, and Canada with 122,893 mt. Slab imports to the US during the same period came from Australia, Italy, Japan and India.