Following weeks of silence and low bids, the billet market in Turkey has surprisingly shown rapid local price increases, thus giving better support to ex-CIS sellers as compared to the Chinese market, at least for now. The key reason is the increase in energy prices, coupled with the scrap price uptrend, which resulted in a significant production cost rise. Accordingly, local Turkish billet suppliers, also seeing a lack of the import billet allocation, have increased their prices by $40-50/mt from early last week and, taking into account some panic among buyers, some small lots have already been booked at high price levels. However, some sources believe the billet is overpriced for now as the rebar demand is lagging back for now.
Domestic billet prices in Turkey have been hovering at around $620-630/mt ex-works for a while, but at the end of last week mills were able to achieve higher prices. In particular, one Marmara-based supplier sold at slightly below $660/mt CPT, SteelOrbis has learned. In addition, a producer from the Iskenderun region traded a medium-sized lot at $650/mt ex-works on Friday. This week has begun with even more ambitious prices at $670-680/mt ex-works and above. Moreover, according to sources, small lots have been sold at $678-680/mt ex-works Iskenderun and $675-680/mt CPT Karabuk region. Some of the mills in the Izmir region have been voicing $690/mt ex-works offers, though admitting these are too high. In addition, an export sale to Morocco has been heard at $650/mt FOB ex-Turkey, also signaling a market improvement.
Taking into account that rebar prices in Turkey are at around $700-720/mt FOB and some sales have been closed at the lower end of the range, the gap with local billet offers is still not good enough to accept the current semis prices. Most market sources say the increased scrap and energy costs are the key reasons behind the higher billet prices, stating that finished steel will react in the upward direction within some time. Still, even though the situation seems to be somewhat shaky, most market sources believe that Turkey now presents a better opportunity for CIS-based mills to sell after weeks of looking only to China. No clear offers have been heard now but the levels of $655-660/mt CFR are considered workable in the Bartin and Izmir regions. The prices for billet from the east of Ukraine have been heard at $645-650/mt CFR depending on the region, but may be increasing shortly.
CIS-based producers have been very cautious this week as they have been more interested in watching the market, which has some space to go up further, rather than go into active negotiations. A few large mills have voiced offers at $630-650/mt FOB Black Sea, which is much higher than the evaluations of suppliers at $620/mt FOB at the highest last Friday.
Though the mood in the Chinese import billet market has been mainly positive after the holidays, the tradable level in China has been not so attractive for CIS-based suppliers now. Market sources have been waiting for new deals at around $720/mt CFR China and slightly above this week, but the activity in the market has not improved so far. Moreover, “China latest bid [after its return from the holidays] was at $722/mt CFR, but the market became quiet after the drop in futures today,” an Asian source said.
Local billet prices in Tangshan have declined by RMB 30/mt ($5/mt) today to RMB 5,300/mt ($822/mt) ex-works, which translates to $727/mt, excluding 13 percent VAT. Rebar futures at Shanghai Futures Exchange have fallen by 4.2 percent or RMB 246/mt ($38/mt) today. The sharp drop in futures and overall sentiments has been connected with the expected easing of production restrictions in the country. Premier Li Keqiang said that the government will raise the energy supply capacity and a "one-size-fits-all" program for lowering production of energy-intensive enterprises, including steel mills, will have to be stopped now.
The SteelOrbis reference price for ex-CIS billet has been increased to $625-630/mt FOB Black Sea, up by $20/mt since late last week. This level is based on the tradable value for Turkey, while the window for sales to China has been closing for some time.