In contrast to the strengthening
billet prices in other major world markets, the US
billet market is currently slowing down. The main culprit behind the weak US
billet market is the sagging demand caused by
production cuts for long products. In general, long product mills are scaling back
production of
wire rod and
rebar, and therefore more billets are available for sale in the spot market.
Domestically, the
billet pricing trend is down, and prices should continue softening through the first quarter of 2007, as the
longs market and seasonal downturn affect the
semis market deeply.
However, the import pricing trend is stable at the moment. Import billets are primarily coming from
Brazil,
Russia, and
Turkey. In general,
billet import prices range from $415 /mt to $425 /mt FOB
Russia or
Brazil. Boosted by their strong home market,
Turkey's asking numbers are now significantly higher, ranging from $445 /mt to $450 /mt FOB Turkish ports.
The most recent data from the
US Steel Import Monitor show that during the month of November, the main countries that exported billets to the US were:
Brazil at 13,835 mt, and
Canada at 3,178 mt.
Russia, which exported 24,525 mt to the US in October, did not export any significant amount of billets to the US in November. On the contrary,
Brazil, which exported just 5,868 mt to the US in October, saw a big jump in November.
As is the case with the
billet market, the
slab market is also facing the problem of oversupply.
Slab imports to the US are mainly coming from
Brazil,
Mexico,
Russia and
Ukraine. In general, average
slab import prices now range from $450 /mt to $470 /mt CFR FO US Gulf ports, while
Mexico is asking for a higher price. The pricing trend for
slab imports is still down, and some buyers predict the prices may drop below $400 /mt before the first quarter of 2007.
In the US
slab market in 2007,
slab demand will be less than the previous year, and there will be no short-supply pressure; the market will still have plenty of
slab supply offers. Even though no immediate turnaround is expected, the market should start to recover in the second quarter.
While the
slab market remains soft, this is not keeping a few dominant suppliers from asking for a price increase of five to 10 percent for long-term contracts. They are trying to boost prices and maintain these higher levels in 2007, to ensure a strong pricing trend. They will not be able to get this increase until the second quarter of next year after the pricing trend turns around.
The greatest quantities of import slabs arriving in the US in November came from
Ukraine at 92,345 mt,
Brazil at 69,717 mt, and
Mexico at 67,856 mt, dropping approximately 35,000 tons, 65,000 tons, and 41,000 tons respectively when compared to October.
Russia, which was the major exporter of slabs to the US in October, at 208,048 mt, only exported 40,106 mt to the US in November. Meanwhile,
Japan, which did not export any slabs to the US in October, exported 34,897 mt in November.
China will remain a significant steel supplier in 2007, as the
production capacity increases relentlessly and excess tonnage has to be exported. However, the Chinese government would like to discourage the export of semi-finished products through the imposition of a 10 percent export tax.
China is now looking to focus more on exporting value-added finished products rather than
semis.