After the announcement yesterday of a new export tax in Russia to be valid up to the end of 2024, the Black Sea billet market has been evaluating the likely impacts. Though most sources believe that, at the end of the day, exporters will have to absorb the value of the tax, sharing the margin with the government, there have been reports of some cancelations and renegotiations of contracts and higher targets voiced by suppliers unofficially.
The SteelOrbis reference price for ex-Black Sea billet has been hiked by $10-20/mt to $480-490/mt FOB, mainly based on expectations and current negotiations. “We will increase prices. There are no other options yet. Now the exchange rate is above 95 rubles [resulting in seven percent tax], so offers for billet will be $500/mt FOB Novorossiysk and wire rod at above $590/mt CFR Turkey,” a Russian producer said. Another source said that mills will “add $20/mt to the previous level of $470-480/mt FOB Black Sea.”
Given that Turkish market players are now trying to evaluate the possible effects of the Russian export duties on their earlier booked cargoes, the current pricing for billet of this origin is rather vague for now. Considering suppliers’ new targets mentioned above, the CFR Turkey levels are estimated at $520-530/mt CFR, and some expect prices up to $550/mt CFR for spot cargoes and especially for those for shipment before October 1. Prior to the latest developments, deals for Russian and Donbass billet had been closed at $500/mt CFR Karadeniz and $515/mt CFR Iskenderun. “The market will find its level once the dust settles, but for now $515-520/mt CFR may be the level. But again, depending on scrap and on rebar, there will be certain limitations to what billet price would be acceptable,” a trader told SteelOrbis.
However, a number of market sources are still skeptical about whether the market is ready to accept such a hike. “I don't think prices can be increased so easily as sales markets are not good,” an international trader said.
The situation with Russian billet supplies and pricing may increase the interest of Turkish mills in purchases of alternative origins. This week, Turkey has been receiving billet offers from Algeria at $525-530/mt CFR while the GCC has been offering at $535-545/mt CFR. Asian mills, namely, Indonesia and Malaysia, are at $535-545/mt CFR.
In the domestic billet segment, the market has been filled with talk of two billet sales in the Iskenderun region at $550/mt ex-works. The transactions have not been fully confirmed, but a wide circle of players consider them to have been done, which means quite an increase from the previous $520-530/mt ex-works levels. Some sources believe such levels are overpriced at the moment. “Today $540/mt is affordable. If $600/mt for rebar is achievable, $550/mt can be done,” an Iskenderun region-based producer told SteelOrbis. The general offer level for billet in Turkey is now estimated at $540-550/mt ex-works.