The billet market situation in the Black Sea and Mediterranean Sea regions has become critical, following Russia’s military attack on Ukraine which started on February 24. Several Ukrainian mills, including billet suppliers, have announced they will suspend production given the tough internal situation in the country and the direct threat to people’s lives. In addition, all Ukrainian ports are non-operational, either having been captured, destroyed, or currently being fought over. “Mariupol and Nikolaev are for the most part destroyed, and in Odessa and at other customs points and ports there is no one available, so vessels cannot move. Kerch is all covered by the Russian navy. In Rostov and Taganrog, traffic has been suspended until March 2, Novo continues operations,” a billet trader told SteelOrbis.
Overall, the result of this situation is that Ukrainian mills, who are the largest billet suppliers from the CIS in the Black Sea region, are now out of the market. This will result in a critical billet supply shortage, and, not only for future deliveries, but also for the cargoes which were booked earlier and now will not be shipped.
Also, there are already issues reported in dealing with Russian billet, even though the port of Novorossiysk is working normally. A number of traders and buyers prefer not to take risks in working with Russia, given the sanctions already imposed and the further ones anticipated, which lead to huge financial and operational uncertainties. “No offers from Russia [from mills for billet to Asia] now. I don’t think that anyone will touch it,” an international trader from Singapore said. According to SteelOrbis’ evaluation, Egypt is the largest market which may suffer from suppliers’ inability to meet orders, as around 200,000 mt were booked from Ukraine alone for March and April shipments. Among the other large buyers who booked cargoes earlier are Turkey, some North African countries and Latin America.
In this situation, traders are trying to compensate for their earlier booked positions and currently Turkey is the only source where they can find these tonnages. According to a large trader dealing with billet sales, there are a lot of panic purchases happening since there will not be any steel exports from the Black sea for at least one to two months. “Of course, some traders will try to buy cargoes in position to profit from this situation, but I think nothing will happen this week,” another source said.
The market information says two deals for 20,000 mt and 25,000 mt of billet from Turkey were closed at $720/mt and $729/mt (might include some extras), both most probably destined for export. Another 20,000 mt sale has been reportedly closed by a mill located in the north of Turkey to an international trader at $720/mt FOB. Previously, the highest workable billet export price in Turkey was around $700/mt FOB. Before the invasion of Ukraine started, the workable ex-CIS billet export price was standing at $680-690/mt FOB.